Written and produced by Newton-John's frequent collaborator John Farrar, "Magic" was released as the soundtrack's lead single in May 1980 and topped the US Billboard Hot 100 for four weeks beginning on August 2.

Record World called it an "infectious pop ballad [that] has a big beat production treatment".

[1] Both US and UK B-sides also appear in Xanadu: All tracks written and produced by John Farrar.

In May 2011, it was remixed by two Australians, DJ Dan Murphy and Steve Peach, to create a dance version.

Newton-John was presented the world premiere of the song on the Australian edition of Dancing with the Stars on Sunday May 22, 2011.