Winwood and Clapton first crossed musical paths as members of the one-off group Eric Clapton and the Powerhouse in March 1966. They recorded songs issued on the Elektra Records compilation album What's Shaking. Later they teamed up again in 1969 with the formation of Blind Faith, shortly after Clapton had left Cream. Blind Faith pioneered the fusion of rock and blues into tremendous studio and stage success. Despite critical and popular acclaim, the band was short-lived with only one album and a brief 1969 tour that debuted 12 July at Madison Square Garden and ended 24 August in Hawaii. Since then, Winwood and Clapton have remained friends but have only performed together a few times over the years for an occasional song at a charity event. In 2000, they both appeared in the 1998 movie Blues Brothers 2000 as members of a fictional blues super group. During Clapton's 2007 Crossroads Guitar Festival, Clapton and Winwood played six songs together including a few Blind Faith songs. After that successful experience, the two decided to collaborate again. The 2008 Madison Square Garden shows were the first full Winwood-Clapton concerts in almost 40 years.
Live from Madison Square Garden was recorded from the 25th through 28 February. The shows were recorded and mixed by James Towler, while the production was handled by James Pluta, John McDermott, and Scooter Weintraub with executive production by John Beug, Michael Eaton, Peter Jackson, and Tom Whalley. Most of the production staff were also involved in the recordings for Eric Clapton's Crossroads Guitar Festivals.
The art direction for the album and DVD was Ellen Wakayama with the design handled by Donny Phillips of the Tehachapi hardcore bands, The Warriors and Machines, and photography by Danny Clinch. Donny is one of the lead graphic designers at Warner Bros. Records, which the other two people mentioned also work for. The artwork was based on the taijitu, although the colours on the packaging were red and blue instead of black and white.