Director Rick Sloane wanted the same look and feel as the original Hobgoblins (1988). Hobgoblins 2 was shot on 35mm film, using only 1-minute-long ends of film stock, which saved about $5,000. No CGI was used, all the effects were done on-camera or with composite shots.
Rick Sloane initially planned on making a Hobgoblins 2 in 1990 and had written a screenplay for it at the time.
The first camera crew was fired halfway through shooting, due to their poor lighting and slowness in setting up shots. Most of the footage had to be re-shot, but some made the final cut.