Every summer, Hayao Miyazaki spent his vacation at a mountain cabin with his family and five girls who were friends of the family. The idea for Spirited Away came about when he wanted to make a film for these friends. Miyazaki had previously directed films such as My Neighbor Totoro and Kiki's Delivery Service, which were for small children and teenagers, but he had not created a film for ten-year-old girls. For inspiration, he read shōjo manga magazines like Nakayoshi and Ribon the girls had left at the cabin, but felt they only offered subjects on "crushes" and romance. When looking at his young friends, Miyazaki felt this was not what they "held dear in their hearts" and decided to produce the film about a girl heroine whom they could look up to instead.
Miyazaki wanted to produce a new film for years, he previously wrote two project proposals, but they were rejected. The first one was based on the Japanese book Kirino Mukouno Fushigina Machi, and the second one was about a teenage heroine. Miyazaki's third proposal, which ended up becoming Sen and Chihiro Spirited Away, was more successful. The three stories revolved around a bathhouse that was based on a bathhouse in Miyazaki's hometown. Miyazaki thought the bathhouse was a mysterious place, and there was a small door next to one of the bathtubs in the bathhouse. Miyazaki was always curious to what was behind it, and he made up several stories about it; one of which was the inspiration for the bathhouse in Spirited Away.
Production of Spirited Away commenced in 2000 on a budget of ¥1.9 billion (US$15 million). Disney invested 10% of the cost for the right of first refusal for American distribution.[16] As with Princess Mononoke, Miyazaki and the Studio Ghibli staff experimented with computer animation. With the use of more computers and programs such as Softimage, the staff learned the software, but kept the technology at a level to enhance the story, not to "steal the show". Each character was mostly hand-drawn, with Miyazaki working alongside his animators to see they were getting it just right. The biggest difficulty in making the film was to reduce its length. When production started, Miyazaki realized it would be more than three hours long if he made it according to his plot. He had to delete many scenes from the story, and tried to reduce the "eye-candy" in the film because he wanted it to be simple. Miyazaki did not want to make the hero a "pretty girl." At the beginning, he was frustrated at how she looked "dull" and thought, "She isn't cute. Isn't there something we can do?" As the film neared the end, however, he was relieved to feel "she will be a charming woman."
The Takahashi Korekiyo residence in the Edo-Tokyo Open Air Architectural Museum was one of Miyazaki's inspirations in creating the spirit world's buildings. Miyazaki based some of the buildings in the spirit world on the buildings in the real-life Edo-Tokyo Open Air Architectural Museum in Koganei, Tokyo, Japan. He often visited the museum for inspiration while working on the film. Miyazaki had always been interested in the Pseudo-Western style buildings from the Meiji period that were available there. The museum made Miyazaki feel nostalgic, "especially when I stand here alone in the evening, near closing time, and the sun is setting – tears well up in my eyes." Another major inspiration was the Notoyaryokan, a traditional Japanese inn located in Yamagata Prefecture, famous for its exquisite architecture and ornamental features. While some guidebooks and articles claim that the old gold town of Jiufen in Taiwan served as an inspirational model for the film, Miyazaki has denied this. The Dōgo Onsen is also often said to be a key inspiration for the Spirited Away onsen/bathhouse.
The film score of Spirited Away was composed and conducted by Miyazaki's regular collaborator Joe Hisaishi, and performed by the New Japan Philharmonic. The soundtrack received awards at the 56th Mainichi Film Competition Award for Best Music, the Tokyo International Anime Fair 2001 Best Music Award in the Theater Movie category, and the 17th Japan Gold Disk Award for Animation Album of the Year. Later, Hisaishi added lyrics to "One Summer's Day" and named the new version "The Name of Life" (いのちの名前 "Inochi no Namae"?) which was performed by Ayaka Hirahara.
The closing song, "Always With Me" (いつも何度でも Itsumo Nandodemo?, literally, "Always, No Matter How Many Times") was written and performed by Youmi Kimura, a composer and lyre-player from Osaka. The lyrics were written by Kimura's friend Wakako Kaku. The song was intended to be used for Rin the Chimney Painter (煙突描きのリン Entotsu-kaki no Rin?), a different Miyazaki film which was never released. In the special features of Japanese DVD, Hayao Miyazaki explains how the song in fact inspired him to create Spirited Away. The song itself would be recognized as Gold at the 43rd Japan Record Awards.
Besides the original soundtrack, there is also an image album, titled Spirited Away Image Album (千と千尋の神隠し イメージアルバム Sen to Chihiro no Kamikakushi Imēji Arubamu?), that contains 10 tracks.
Both Walt Disney Pictures and DreamWorks bid for the US distribution rights. Eventually, Disney won the rights to dub the English adaptation of Spirited Away, under the supervision of Pixar animator John Lasseter. A Miyazaki fan, Lasseter would sit with his staff and watch Miyazaki's work when encountering story problems, and at one point they did so with Spirited Away, which impressed Lasseter. Upon hearing his reaction to the film, people at Disney asked Lasseter if he would be interested in trying to bring Spirited Away to an American audience. Lasseter agreed to be executive producer for English adaptation. Soon, several others began to join the project: Beauty and the Beast co-director Kirk Wise and Aladdin co-producer Donald W. Ernst joined Lasseter as director and producer of Spirited Away respectively. Cindy Davis Hewitt and Donald H. Hewitt penned the English-language dialogue, which they wrote to match the characters' original Japanese-language lip movements.
The cast of the film consisted of Daveigh Chase, Jason Marsden, Susan Egan, David Ogden Stiers, and John Ratzenberger. Advertising was limited, and Spirited Away was only mentioned in a small scrolling section of their film page on Disney's official website. Disney had sidelined their official website for Spirited Away and it remained hidden. The promotion of the film was given a worse treatment than Disney's own B-movies by comparison. Marc Hairston argues this was a justified response to Ghibli's retention of the merchandising rights to the film and characters, which imposed a limitation on Disney that did not validate the marketing costs.