In early 1982 Black Sabbath's publishing deal with their previous management expired. By re-recording several songs from their earlier catalog and releasing them as a live album, all the songwriters stood to see a hefty profit from the publishing royalties. The liner notes state that the album was recorded in Seattle, San Antonio and Dallas during the 1982 tour in support of the Mob Rules album, but doesn't give specific information on which songs were performed in which location.
In his autobiography Iron Man: My Journey Through Heaven & Hell with Black Sabbath, guitarist Tony Iommi recalls that the band's live show during this period featured "lots of pyro with fire and bombs" and that while playing the Hammersmith Odeon the bombs had been tested and "blew a two-foot-wide hole in the floor on my side. If I'd been there, I would have been blown up. Christ, it was dangerous." Iommi also admits that the band had to cancel a show at Madison Square Garden when the bombs blew out the tubes in all the amps during the first note of the first song "War Pigs". In the liner notes to the 2008 retrospective The Rules of Hell, vocalist Ronnie James Dio remembers, "It was an excellent tour. I think we were probably riding quite high on the Heaven and Hell success, and so we ended up playing really, really well. Even towards the end the shows were still great." Tension, however, had been building for some time between the band members, with rock journalist Steffan Chirazi observing in 2008 that the story behind the creation of Live Evil is one of "quiet yet savagely visceral turmoil and a band collapsing under their weight of silence, unspoken accusation, and an unforgiving schedule."
Of the oddly distant crowd sound, Iommi remarked: "We forgot about the audience!" In the same interview, asked to choose "a track that the engineer didn't cock up", he said: "I liked 'Heaven and Hell' flowing into 'Sign of the Southern Cross'. It had its moments, that one."