The film was shot on location near Broken Hill, New South Wales and at Supreme Studios Sydney and was made with a budget of $500,000.
Film critic David Stratton praised the film as having a "special vision," with brilliant production design, but while furthermore opined that "the film frustrates because of its lethargy and stiltedness"
Rolling Stone magazine called the soundtrack recording "an album of stunning instrumental beauty and exquisite soundscapes" and awarded it 4-stars.
In June 2018, director Alex Proyas released a trailer on his YouTube channel for a re-release of the movie, remastered from original 16mm negative and featuring a restored soundtrack from the original Dolby Stereo mixes. The movie was re-released internationally in September 2018 on Blu-ray and DVD by Umbrella Entertainment. Composer Peter Miller's original soundtrack was also re-released as a 30th anniversary edition.
Spirits was nominated for two Australian Film Institute (AFI) Awards in 1988 for Production Design (Sean Callinan and Peter Miller) and for Costume Design ( Mathu Anderson and Angela Tonks). The following year, the soundtrack was nominated for an Australian Recording Industry Award (ARIA). In 1990 the film won the Special Prize at the Yubari International Fantastic Film Festival.