The working title for this film was His Arabian Nights. More than eighteen months had passed between the release of Cantor's previous film and this one; during this time, he was one of the top radio stars. Cantor originally was going to make Saratoga Chips, from an unpublished play by Damon Runyon and Irving Caesar as his first film for Twentieth Century-Fox, which paid what was said to be the highest price to date for an unpublished play, $50,000. In 1938, the Ritz Brothers starred in Twentieth Century-Fox's Straight, Place and Show (see below) which was based on the play. According to a HR news item, James Tinling was assigned to direct second unit material to speed up production. According to a NYT article and a pressbook for the film, Ali Baba Goes to Town cost more than one million dollars to produce. The pressbook also notes that the "Old Baghdad" set was built on a twenty-five acre plot. The song "Twilight in Turkey" by Raymond Scott was published and recorded before its use in this film. According to a HR news item, this film, along with Twentieth Century-Fox's Heidi (see below), introduced a new three-tone tinting process, which had been under development for the previous ten months. The process involved a combination of sepia, amber and copper tones for daylight, and blue, orange and copper for nighttime.
       According to news items and information in the Twentieth Century-Fox Records of the Legal Department at the UCLA Theater Arts Library, on 27 Aug 1937, propmaker Philo Goodfriend and grip Harry Harsha were killed when the "magic carpet," weighing approximately 1,500 pounds, fell on them during a test. Goodfriend had been operating the electric hoist and Harsha was operating the movements of the suspended carpet. Two other property men, J. D. Bowman, who controlled the swaying of the carpet, and Nick DeGenner, who was riding the suspended carpet, were also injured. A coroner's jury, ruling that the deaths were accidental, was unable to fix blame for the accident. The accident delayed the completion of the film, which was scheduled to end 28 Aug. Cantor, who, according to studio publicity, suffered skinned knees, bruised knee caps and strained ligaments from kneeling on the coarse-weave carpet while wind machines blasted him with up to fifty miles per hour winds, was elected as an honorary member of the Hollywood Stunt Men, following completion of the film.
       The scenes of the movie premiere at the end of the film were shot at the premiere of Twentieth Century-Fox's Wee Willie Winkie (see below) at the Carthay Circle Theatre on 25 Jun 1937. In addition to Eddie Cantor, other celebrities introduced at the premiere by Tony Martin were Victor McLaglen, Phyllis Brooks with Michael Whalen, Douglas Fairbanks, Dolores Del Rio, the Ritz Brothers, Jack Haley, Ann Sothern with Cesar Romero, Sonja Henie with Tyrone Power, John Carradine escorting June Lang and Louise Hovick, and Shirley Temple with her parents. According to MPH, the film was offered to exhibitors "in the platinum sepia process coming currently into favor." According to early billing sheets in the legal records, the Allan K. Foster Troupe of Girls and Horses were to perform a specialty act in the film, and Norman Willis, Hector Sarno and Harry Burns were cast as "Arabs." Their participation in the final film has not been confirmed.
       Reviewers remarked on the satiric content of the film. NYT, in an article about the film, noted the film's similarity to the 1931 Fox film A Connecticut Yankee, starring Will Rogers (see below) and called this film "the first instance in which a studio has leveled satire and ridicule at the [Franklin D. Roosevelt] Administration"; MPH noted, "Mr. Cantor personally attends to the chore of burlesquing Mr. Roosevelt's phrases and gestures of public address." Cantor and Twentieth Century-Fox were sued for $1,025,000 in damages by Andreas F. Michael, a writer who alleged that the film was plagiarized from material he submitted to the studio in 1936. According to information in the legal records, Twentieth Century-Fox won the case in 1939. In correspondence concerning the plagiarism charge, Gene Fowler acknowledged that the story grew out of an idea for writing a New Deal comedy similar in formula to A Connecticut Yankee and that he believed that Cantor suggested the idea for the scene in the beginning with the tramps. On 26 Oct 1937, three days before the film's national release, a celebration marking Eddie Cantor's twenty-fifth year as a "prime factor in American entertainment," according to MPH, was scheduled.