Felt Mountain peaked at number 57 in Goldfrapp's native United Kingdom, and was certified gold in October 2001. It was generally well received by music critics, and it was described as "simultaneously smarmy and seductive, yet elegant and graceful". In 2001, the album was shortlisted for the Mercury Prize, an annual music prize awarded for the best British or Irish album from the previous year.
Goldfrapp signed a recording contract with London-based record label Mute Records in August 1999. The pair began recording their debut album over a six-month period, beginning in September 1999, in a rented bungalow in the Wiltshire countryside. The recording process was difficult for Alison Goldfrapp, who was often alone and disturbed by the mice and insects in the bungalow. Gregory described their recording sessions as intense because he was unaccustomed to composing with others. Goldfrapp contributed the album's lyrics, and Gregory and Goldfrapp composed the music together. The lyrics are abstract obsessional tales inspired by films, Goldfrapp's childhood, and the loneliness she felt while recording the album. Musically, the album takes influence from a variety of styles including 1960s pop, cabaret, folk, and electronica.
Allmusic reviewer Heather Phares referred to the album as a "strange and beautiful mix of the romantic, eerie, and world-weary" and named it "one of 2000's most impressive debuts". Eric Wittmershaus of Flak Magazine called Felt Mountain "an enchanting, accessible debut", citing "Human" and "Deer Stop" as its best songs. In a review for Pitchfork Media, Matt LeMay described the album as "elegant and graceful", but felt that the "songs aren't all that different from one another." Sacha Esterson of musicOMH compared Felt Mountain to Portishead and wrote that it could be a "contender for the year's best album".Yahoo! Music's Ken Micallef commented that the duo "make elegiac music as elegant as 'Diamonds Are Forever' and as haunting as Bobbie Gentry's 'Ode to Billie Joe'", concluding that the album's "dark night of the soul is mostly bleak, beautiful, and deliciously bizarre." Andrew Lynch of entertainment.ie noted that "[a]lthough at times it feel [sic] a little contrived, for the most part this is stylishly decadent music that should appeal to all fans of film noir." The NME viewed the album as "cold, desolate and old-fashioned" and argued that Felt Mountain was not a "bad concept" except that "Portishead got there first, and managed to update the spy-film vibe with a hefty dose of break-driven twilight melancholia."
Q magazine included the album on its list of the top fifty albums of 2000. The following year, Felt Mountain was shortlisted for the Mercury Prize, an annual music prize awarded for the best British or Irish album from the previous year. In 2006, the album was included in Robert Dimery's book 1001 Albums You Must Hear Before You Die. In November 2009, The Times ranked Felt Mountain at number sixteen on its list of the 100 best pop albums of the 2000s. The album was placed at number ninety-four on Slant Magazine's list of the best albums of the 2000s.
Felt Mountain debuted at number 144 on the UK Albums Chart, selling 914 copies in its first week. In 2001, the album peaked at number fifty-seven, and has sold 177,096 copies as of August 2005.Felt Mountain was certified gold by the British Phonographic Industry on 12 October 2001. In France, the album reached number 48, and remained on the albums chart for eleven weeks. It reached the top forty in Germany and the top fifty in Australia and Austria. Despite not appearing on any major charts in North America due to limited promotion, Felt Mountain has sold 52,000 copies in the United States as of August 2006.
"Lovely Head", Felt Mountain's opening track, features high lonesome whistling and heavily processed vocals. The song was described as influenced by Shirley Bassey and released as the album's lead single. The second track, "Paper Bag", is about being obsessed with someone and not being able to have them. It is followed by the third single "Human", a track with a mambo-style beat. The fourth song, "Pilots", which describes travelers floating in the atmosphere above the earth, was inspired by John Barry's James Bond theme songs. In the United Kingdom, a remixed version of the song was released as a single, reaching number sixty-eight on the UK Singles Chart.
The ballad "Deer Stop" features childlike vocals and sexually suggestive lyrics. The title track was influenced by Goldfrapp's "idea of a wolf being whipped in this little Tudor house overlooking a snowy landscape". "Oompa Radar", the seventh track, was inspired by Roman Polanski's 1966 film Cul-de-Sac. The cabaret-influenced song uses a flugelhorn and a cuckoo clock to switch between tempos. "Utopia" was released as the album's second single. The album closes with "Horse Tears", a minimalist piano ballad with filtered vocals.