Eagles' biographer Marc Eliot states that "New Kid in Town" captures "a precise and spectacular moment immediately familiar to any guy who's ever felt the pain, jealousy, insecurity, rage and heartbreak of the moment he discovers his girlfriend likes someone better and has moved on." He also suggests that it captures a more abstract theme of "the fickle nature of both the muse and the masses."
In the liner notes of The Very Best Of, Don Henley talked about the song's meaning:
It's about the fleeting, fickle nature of love and romance. It's also about the fleeting nature of fame, especially in the music business. We were basically saying, 'Look, we know we're red hot right now but we also know that somebody's going to come along and replace us — both in music and in love.'