The song was written as a torch song for the character of Sally to sing in the "Loveland" portion of the musical. The song "expresses her preoccupation with Ben, her idealized lover...With infinite attention to detail, Sondheim leads Sally from sunrise to sleepless night, revealing that every second of her existence is defined by her longing...the number ...explores the extent to which she has lost herself in this make-believe world of undying desire." As originally staged, Sally comes onstage in a "clinging, beaded silver" dress, holding a microphone. The "cute" Sally from Phoenix "has become a languid torch singer." She repeats her lines, reflecting "the paralysis about which she sings...the phrase 'It's like I'm losing my mind' occurs no less than six times."
In the UK Singles Chart, the most successful version has been by Liza Minnelli, reaching number six. It was the lead single from her 1989 album, Results, produced by Pet Shop Boys and Julian Mendelsohn. The 12" release peaked at number eleven on the Billboard Maxi Singles Sales chart. It also peaked at number twenty-six on the American dance chart.
Pet Shop Boys' demo version of "Losing My Mind" (which has Neil Tennant singing the vocal) was later remixed and released as a B-side on the Pet Shop Boys' single, "Jealousy". This demo version contains a scream that Minnelli opted not to include on her release.