Science fiction author David Wingrove has commented that this work "sidesteps immediate political issues whilst conjuring up marvellous visual images of an ageless pastoral Germany."

The film opens at an 18th-century ball, where Baron Hieronymus von Münchhausen is propositioned by a young woman who is engaged to another man.

He begins in his home town of Bodenwerder, back from an adventure with his trusted servant Christian Kuchenreutter, who has invented a gun that can shoot accurately at a distance of 100 miles.

After two months as a slave, the Baron is reunited with Kuchenreutter and his runner, Der Läufer, who can cover hundreds of miles in a matter of minutes.

He makes a wager for his and the princess's freedom with the king, wherein his runner must retrieve some Tokay wine from Vienna within an hour.

However, before the Baron can leave the Moon, Kuchenreutter has a heart attack and dies in his arms, disappearing in a puff of smoke.

Hippler, who was instated as Reichsfilmdramaturg in 1939 by Goebbels, shared his view that all artistic disciplines, including film, should be "co-ordinated" to echo the propaganda themes that the regime chose to highlight, following the policy of Gleichschaltung.

[2] Münchhausen represented the pinnacle of the Volksfilm style of propaganda designed to entertain the masses and distract the population from the war, borrowing the Hollywood genre of large budget productions with extensive colorful visuals.

The film’s production began in 1941 with an initial budget of over 4.5 million Reichsmarks (ℛℳ) that increased to over 6.5 million ℛℳ, after Goebbels’ intentions to “surpass the special effects and color artistry” of Alexander Korda's Technicolor film The Thief of Bagdad.

[4] Josef von Báky looked to this film as well as Hollywood's productions of Snow White and the Seven Dwarfs and Gone with the Wind for visual inspiration.

Emil Hasler and Otto Gülstorff designed the set, and Konstantin Irmen-Tschet was placed in charge of editing and staging the film, including the special effects.

[4] The sequence of scenes in Venice was shot on location, with Irmen-Tschet gaining private access to the Grand Canal for an entire day, as noted by Eberhard von Weise who worked on the film's production.

Hippler denied these claims asserting that in “total war”, as outlined in Goebbels’ 1943 Sportspalast speech, “national life becomes weapons” and strengthening the morale of a country was key to the success of the German campaign.