In summer 1967, director George Dunning brought German artist Heinz Edelmann to London to work as production designer on this movie. The script wasn't ready, and Edelmann wasn't given a specific assignment. After two months of inactivity, he decided to quit. He vented his frustrations by drawing a series of villainous characters, which ultimately became the Blue Meanies, the Apple Bonkers, and The Glove. Dunning loved the sketches. From then on, Edelmann was a guiding force in the production, designing most of the characters and backgrounds and helping to develop the story. He let his imagination run rampant and cultivated a style of "visual overload" (his words) to cover the plot holes and maintain interest. Many viewers assumed Edelmann got his ideas from using hallucinogens. He said, "I had never taken any drugs. I'm a conservative, working class person who'd stick to booze all his life. And so I just knew about the psychedelic experience just by hearsay. And I guessed what it was."
The Beatles hated "The Beatles (1965)," the television cartoon show of them, which was produced by Al Brodax and George Dunning. When these same men approached the band with this feature project, they agreed only as an easy way of completing their three-picture deal with United Artists. They contributed an unused track recorded for the "Sgt. Pepper" album, "Only a Northern Song", and three quickly-produced new numbers: "Hey Bulldog", "All Together Now", and "It's All Too Much". The rest of the songs were mined from their existing catalog and used by the screenwriters for story elements and characters (the titular Yellow Submarine, Pepperland, the Nowhere Man). As it turned out, The Fab Four were so impressed by the finished film they agreed to appear in a short live-action epilogue for it. John Lennon and Paul McCartney later expressed regret for not being more actively involved in the production.
Director George Dunning was given only eleven months to complete the film. At the time, a typical Disney animated feature took four years to make. Dunning had to quadruple his studio staff and fight off financial backers who wanted to change the actors' Liverpool accents.The Beatles wanted little to do with the project; voice actors were used for the characters' spoken dialogue. The movie was a smash hit, bringing Dunning immense prestige and a special award from the National Society of Film Critics, U.S. Even the band was impressed, and agreed at the last minute to appear in a hastily shot live-action epilogue. Ironically, Dunning lost money on "Yellow Submarine". He agreed to make it for a flat fee, which he plowed back into the production when it ran over budget, and saw none of the enormous profits it generated. He never made another feature-length film.
The original British version was restored in 1998 for release in 1999. American audiences finally got to see five minutes of footage that had been cut from the original one-hour-25-minute U.S. version, including the "Hey Bulldog" sequence.
When the movie was being restored for DVD in 1998, the producers obtained The Beatles' permission to remix the songs in order to produce a proper 5.1 music track. Engineer Peter Cobbin went back to the original four-track work tapes and assembled true multi-track masters for each of the 15 songs, enabling him to achieve stereo effects and add clarity that had never previously been possible. Many Beatles fans objected, but Sir Paul McCartney, Sir Ringo Starr, and George Harrison reportedly approved the new mixes.