Like many indie-minded directors of low-budget films, Abel Ferrara didn't bother with permits most of the time. "We weren't permitted on any of this stuff", editor Anthony Redman admitted. "We just walked in and started shooting." For the scene in which the strung-out lieutenant walks through a nightclub, they sent Harvey Keitel through an actual club.
Abel Ferrara said a scene that epitomized the movie for him, even though he never got around to filming it, was one where the Lieutenant robs an electronics store, leaves, then gets a call about a robbery at the electronics store. He responds in an official capacity (they don't recognize him), takes a statement, walks out, and throws the statement in the garbage. "And that to me is the Bad Lieutenant, you know?" Ferrara said.
Part of the plot was inspired by a real rape of two nuns in a New York City convent. Just like in the film, rumors circulated of a cash reward being put out for the rapists' capture. The detective who caught the rapists, Bo Dietl, played a detective in this film. He is now a best-selling author.
According to Abel Ferrara, the film was originally supposed to be funny. "It was always, in my mind, a comedy", Ferrara said. He cited the scene where the Lieutenant pulls the teenage girls over, as a specific example of how Christopher Walken would have played it, and how Harvey Keitel changed it. "The Lieutenant was going to end up dancing in the streets with the girls as the sun came up. They'd be wearing his gun belt and hat, and they'd have the radio on, you know what I mean? But oh my God, Harvey, he turned it into this whole other thing."
Roger Ebert wrote in his critic review, going back to when Harvey Keitel first worked with director Martin Scorsese, "Keitel starred in Scorsese's first film and has spent the last 25 years taking more chances with scripts and directors than any other major actor. He has the nerve to tackle roles like this, that other actors, even those with street images, would shy away from. He bares everything here - his body, yes, but also his weaknesses, his hungers. It is a performance given without reservation".