Based on conceptual designs by Brian Froud, the film was written by Terry Jones, and many of its characters are played by puppets produced by Jim Henson's Creature Shop.

Various other scriptwriters rewrote it and added to it, including Laura Phillips, Lucas, Dennis Lee, and Elaine May—although Jones received the film's sole screenwriting credit.

Hoggle encounters Jareth, who instructs him to give an enchanted peach to Sarah, calling his loyalty into question, as he was supposed to take her back to the beginning of the labyrinth.

[7] Goblin Corps performed by Marc Antona, Kenny Baker, Michael Henbury Ballan, Danny Blackner, Peter Burroughs, Toby Clark, Tessa Crockett, Warwick Davis, Malcolm Dixon, Anthony Georghiou, Paul Grant, Andrew Herd, Richard Jones, John Key, Mark Lisle, Peter Mandell, Jack Purvis, Katie Purvis, Nicholas Read, Linda Spriggs, Penny Stead, and Albert Wilkinson.

I think what we are trying to do with this film is kind of harken back to a lot of those classic fantasy adventures that a young girl goes into: The Wizard of Oz, Alice in Wonderland, and the works of Maurice Sendak.

These are the stories that have fascinated her.Richard Corliss noted that the film appeared to have been influenced by The Wizard of Oz and the works of Maurice Sendak, writing that, "Labyrinth lures a modern Dorothy Gale out of the drab Kansas of real life into a land where the wild things are".

The film's concept designer Brian Froud, who had previously collaborated with Henson on The Dark Crystal, has stated that the character of Jareth was influenced by a diverse range of literary sources.

Bowie's costumes were intentionally eclectic, drawing on the image of Marlon Brando's leather jacket from The Wild One as well as that of a knight "with the worms of death eating through his armor" from Grimms' Fairy Tales.

[17] Henson discussed the film's origins to say that he and Froud "wanted to do a lighter weight picture, with more of a sense of comedy since The Dark Crystal got kind of heavy, heavier than we had intended.

[21] Jones is credited with writing the screenplay, while the shooting script was actually a collaborative effort that featured contributions from Henson, George Lucas, Laura Phillips, and Elaine May.

[23] Henson intended the protagonist of the film, at different stages of its development, as a king whose baby had been put under an enchantment, a princess from a fantasy world, and a young girl from Victorian England.

[27] Henson eventually wanted a big, charismatic star "who could change the film's whole musical style" to play the Goblin King[17] and sought a contemporary musician for the role, considering Sting, Prince, Mick Jagger, and Michael Jackson before choosing Bowie.

[28] Henson stated that, "I wanted to put two characters of flesh and bone in the middle of all these artificial creatures, and David Bowie embodies a certain maturity, with his sexuality, his disturbing aspect, all sorts of things that characterise the adult world.

During a meeting that took place on June 18, 1984, Henson showed Bowie The Dark Crystal and a selection of Brian Froud's concept drawings to pique his interest in the project.

Members of Henson's family also worked on the production, including son Brian (the voice and chief puppeteer for Hoggle) and daughter Cheryl (who assisted on one of the Fireys and is also credited for building the characters).

Other goblin puppeteers included David Rudman (also known for his work on Sesame Street), Robin Stevens, Don Austen, Robert Tygner, and, briefly, Jim Henson himself.

Shari Weiser was inside the costume, while Hoggle's face was radio-controlled by Brian Henson (who also provided the character's voice and performed a few goblins) and three additional puppeteers.

The film's production notes state that, "the entire forest required 120 truckloads of tree branches, 1,200 turfs of grass, 850 pounds (390 kg) of dried leaves, 133 bags of lichen, and 35 bundles of mossy old man's beard".

[42] The scene where Sarah encounters the Fire Gang was altered in post-production, as it had been filmed against black velvet cloth to disguise the puppeteers, and a new forest background was added behind.

[67] Labyrinth opened at number eight at the US box office with $3,549,243 from 1,141 theaters, which placed it behind The Karate Kid Part II, Back to School, Legal Eagles, Ruthless People, Running Scared, Top Gun, and Ferris Bueller's Day Off.

The website's critics consensus reads, "While it's arguably more interesting on a visual level, Labyrinth provides further proof of director Jim Henson's boundless imagination".

[78] Gene Siskel's review of Labyrinth for the Chicago Tribune was highly negative, and he referred to it as an "awful" film with a "pathetic story", "much too complicated plot", and "visually ugly style".

Saw Tek Meng of the New Straits Times acknowledged that "Sarah's experiences in the labyrinth are symbolic of her transition from child to woman" but ultimately found the film "too linear" for its latent themes to come through.

[83] The New York Times' Nina Darnton compared the film's tone to the writings of E. T. A. Hoffmann, stating that Hoffman's The Nutcracker "is also about the voyage to womanhood, including the hint of sexual awakening, which Sarah experiences too in the presence of a goblin king".

In his largely positive review of the film for Time, Richard Corliss praised him as "charismatic" referring to his character as a "Kabuki sorcerer who offers his ravishing young antagonist the gilded perks of adult servitude".

"[82] In a largely critical review, Hal Lipper found that, "Bowie forgoes acting, preferring to prance around his lair while staring solemnly into the camera.

"[90] Michael Wilmington described Labyrinth as "dazzling", writing that it is "a real masterpiece of puppetry and special effects, an absolutely gorgeous children's fantasy movie", for the Chicago Tribune in 2007.

[103] Academic Andrea Wright wrote that Labyrinth has managed to maintain audience popularity long after its initial release to a greater extent than The Dark Crystal.

[105][106] The strong DVD sales of Labyrinth prompted rights-holders the Jim Henson Company and Sony Pictures to look into making a sequel,[99] and Curse of the Goblin King was briefly used as a placeholder title.

[126] Tokyopop published a manga-style four-volume comic sequel between 2006 and 2010 called Return to Labyrinth, written by Jake T. Forbes and illustrated by Chris Lie, with cover art by Kouyu Shurei and in partnership with The Jim Henson Company.