The lyrics are based on a campaign in late 1969 by John Lennon and his wife, Yoko Ono, who rented billboards and posters in eleven cities around the world that read: "WAR IS OVER! (If You Want It) Happy Christmas from John and Yoko." The cities included New York, Tokyo, Rome, Athens, Amsterdam, and London. At the time the United States was deeply entrenched in the unpopular Vietnam War. The line "War is over/If you want it/War is over/Now!", as sung by the background vocals, was taken directly from the billboards.
The song's melody has been compared to that of the folk standard known as "Skewball" or "Stewball".
The record starts with a barely-audible whisper of Christmas greetings to their children: Yoko whispers "Happy Christmas, Kyoko," then John whispers "Happy Christmas, Julian." The lyric sheet from the 1982 release The John Lennon Collection erroneously gives this introduction as "Happy Christmas, Yoko. Happy Christmas, John."
The single was released on December 6, 1971 in the US; the UK release was delayed until the following November due to a publishing dispute. Directly following John Lennon's death on December 8, 1980, the song was re-released in the UK on December 20, 1980. It is known as the "secret number one", as it featured top in the singles chart for the week ending January 3, 1981, which was unpublished (as was usual for the Christmas week at that time). Thus, it is rarely (if ever) credited as a number one single.