While traveling to Canada to attend a film festival in Toronto, director and co-writer Fred Vogel was arrested, pending charges of transporting obscene materials into Canada, when copies of August Underground and its sequel were found by customs officials among the merchandise he had intended to bring to the convention. The charges were eventually dropped, after Vogel had spent roughly ten hours in customs prison.
The film was shot on a Hi8 camera but was degraded in post production to make it appear as realistic as possible.
The old woman who was stabbed in the film was actually the director Fred Vogel's grandmother.
The original plan to market this film was to record it on to blank VHS tapes and leave them in random locations for people to find and watch. However that plan was scrapped because 9/11 happened and the director Fred Vogel stated that he would've gone to jail for real if they still did that after 9/11.
Director Fred Vogel still likes screening the film to this day.