Director Tom DiCillo didn't want to beg people for money to make this film, so he asked his actors if they would work for free. All of them agreed and most of them even put up money themselves. Eventually anybody who contributed a few dollars got a part in the movie.
This was the first credited film role for Peter Dinklage who had previously avoided the traditional elf and leprechaun type of role offered to actors with dwarfism. In Living in Oblivion he plays Tito, a frustrated dwarf actor who complains about his clichéd roles.
The recurring theme of the film is dream sequences. The lead character's last name "Reve" means "dream" in French.
The idea that writer/director Tom DiCillo modeled the buffoonish Chad Palomino character on Brad Pitt after working with Pitt on Johnny Suede (1991) is a myth. Pitt himself was slated to appear as the Palomino character, until a scheduling conflict with Legends of the Fall (1994) forced him to drop out and be replaced by James Le Gros. Apparently, LeGros *was* mocking a self-absorbed Hollywood star, but it wasn't Pitt. DiCillo said that while he can't name any names, LeGros confided that he had lifted all of the Palomino character's mannerisms from a star with whom he had just finished working.