With screenplay by Raghunath Paleri, the story revolves around a mystical indigenous goblin called "Kuttichathan" who is under the spell of an evil sorcerer, however it gets released by three children and then befriends them.

The character "Kuttichathan" is formed based on the specialties of a deity goblin popularly known as "Chathan" who is worshiped mainly in the south Indian state of Kerala.

One of them is Karimbhootham (black magician), who enslaved an invisible spirit with his magic spells, whom he calls "Kuttichathan" ("Little Goblin" in English and "Chhota Chetan" in Hindi).

[6][7] To understand the technology, Jijo travelled multiple trips to Burbank, California and bought sample reels of 3D films and held a preview in his studio.

[2] The required equipment needed for the film had to be imported from the US and Jijo managed to do this with the help of his friend, Thomas J Easaw.

Jijo carried the idea of a friendly ghost for years, he sought the opinion of people such as Anant Pai and Padmarajan for the film's writing.

Raghunath Paleri came on board as the film's writer, took all the inputs from the experts and created the plot of three kids and a ghost.

Satish Kaushik plays the part of Jagathi Sreekumar as a scientist who also tries to catch Chetan, but gets destroyed.

[7] K. Sheker and Jijo decided on a rectangular-shaped rotating room to suit the wider, landscape-like nature of the 3D frame.

[7] The film's release also attracted rumours that the use of 3D glasses was spreading conjunctivitis, which was dubbed "Madras Eye".

These rumours prompted the makers to add footage before the film began with prominent actors Prem Nazir, Amitabh Bachchan, Jeetendra, Rajinikanth, Chiranjeevi and others explaining that the glasses were sterilised after each use.

[7] The film was commercial success and highest grossing Malayalam film at that time, which collected ₹ 2.5 crore from box office and it's Hindi dubbed version Chota Chetan also collected ₹ 1.3 crore from box office.

The film was re-released in 1997 which was also highly successful at the box office; it had earned 60 times its initial investment.

[16] In 2010, Sri Thenandal Films re-released the Tamil version, titled Chutti Chathan in 2010, with added scenes starring Santhanam and Prakash Raj.

[19] The optical illusion house set used in the song "Aalipazham Perukkaan" was built in Kishkinta Theme Park, near Tambaram, Chennai.