This film was produced by Joe Ruby and Ken Spears, the original creators of Scooby-Doo for Hanna Barbera and the founders of 1980s animation company, Ruby-Spears Productions. Joe Ruby shares a co-writer credit.
At one point, there was talks for a sequel in the 2010s, despite the movie's failure. Paramount declined the offer, and the director suggested that they wouldn't have to put money in it, and he could finance the movie's money himself with a similar budget as the original movie, but they still rejected the offer. Both Mark Jones and Max Grodénchik said they would love to do a sequel.
After finishing Leprechaun (1992), Mark Jones wanted to create another fairytale horror franchise, similar to Leprechaun. Which was why he didn't return to direct Leprechaun 2 (1994).
When Mark Jones completed the script, a friend of his knew Dino De Laurentiis who could help finance the movie. But when he asked to read the script, he requested to translate it in Italian, despite being fluent in English.
Unlike Leprechaun (1992), which had a $980,000 budget and 24 days to shoot, this movie's budget was three times it's budget of $3,000,000 with 32 days to shoot. And at the time, the director expected it's producer Dino De Laurentiis to be a tough sell.