On the two previous albums Breathe (1996) and Redneck Wonderland (1998), all tracks were credited "Midnight Oil"; on Capricornia the band returns to crediting individual contributors for each track, with Moginie dominating the list as is seen on most of their records.

After the hard rock/electronic sounds of the previous album Redneck Wonderland, on this record Midnight Oil moved to a stripped back sound, with acoustic and clean electric guitars dominating the sound of the album (Golden Age, Luritja Way, Under the Overpass), although some tracks (Too Much Sunshine, Mosquito March, Poets and Slaves) feature significant distorted guitars.

The album was produced, mixed and arranged by Warne Livesey, who also worked on Midnight Oil's seminal Diesel and Dust and Blue Sky Mining records.

The name and concept of Capricornia was taken from the novel of the same name written by the Australian author Xavier Herbert.

The name Capricornia refers to part of the Queensland coast and inland region around Rockhampton, which is close to the Tropic of Capricorn.