Producer Robert Evans initially offered Robert Towne $175,000 to write a screenplay for The Great Gatsby, but Towne turned it down and instead asked for $25,000 to write his own original story, Chinatown.

Chinatown was conceived as the first part of a planned trilogy by Towne about detective J.J. Gittes and the exploitation of natural resources in Los Angeles; the second film, The Two Jakes, was made in 1990, but its failure canceled a planned third film about land speculation.

Towne took the film's title and its closing exchange about Chinatown from a story told by a Hungarian vice cop who had worked in LA's Chinatown, who believed police were better off doing nothing there since you could never tell what was really going on.

The screenplay was inspired by Carey McWilliams's book Southern California Country and a West magazine article called 'Raymond Chandler's L.A.'; Towne wrote to McWilliams that his book had changed his life and inspired him to write about the place where he was born.

According to Sam Wasson's book The Big Goodbye, Towne secretly employed an uncredited writing partner, an old college friend named Edward Taylor, for more than 40 years, including on Chinatown.

Towne wrote the screenplay with Jack Nicholson specifically in mind for the role of J.J. Gittes, whose name was inspired by Nicholson's real-life friend, producer Harry Gittes.

Jane Fonda was strongly considered for the role of Evelyn Mulwray, but director Roman Polanski insisted on casting Faye Dunaway instead.

Roman Polanski himself appears in a cameo as the gangster who slashes Gittes' nose; the effect used a special knife that could have actually cut Jack Nicholson's nose had Polanski not held it correctly.

In 1974, while Nicholson was filming The Fortune, Time magazine researchers informed him that the woman he believed was his sister was actually his mother, an eerie real-life parallel to the film's revelation about Evelyn and Katherine.

Polanski went through several cinematographers before settling on John A. Alonzo partway into production; because Polanski's English was poor, the two communicated in Italian, which Alonzo then translated for the crew.

Producer Robert Evans blocked William A. Fraker from being cinematographer, despite Polanski's initial choice, fearing that reuniting Polanski with his Rosemary's Baby cinematographer would give the duo too much creative control.

Following a technique Polanski attributed to Raymond Chandler, the entire film is shown subjectively through Gittes' perspective, with the character appearing in every scene; when Gittes is knocked unconscious, the film fades to black and back, mirroring his own experience.

Towne wanted Noah Cross to die and Evelyn Mulwray to survive in his original ending, but Polanski insisted on a bleaker, tragic conclusion in which Evelyn dies; the two argued over this and Polanski wrote the final scene just days before it was shot.

Jerry Goldsmith composed and recorded the film's now-celebrated score in just ten days after producer Robert Evans rejected Phillip Lambro's original score at the last minute.

Trumpet player Uan Rasey, MGM's first trumpet, recalled that Goldsmith instructed him to play the score's haunting solos 'sexy — but like it's not good sex.'

The character Hollis Mulwray was loosely inspired by real-life Los Angeles water engineer William Mulholland, and the film's plot draws on real historical events including the St. Francis Dam disaster of 1928 and an artificial water shortage caused by faulty valves in 1903–1904.