In 2001, Duff gained fame through her starring role in the Disney Channel series Lizzie McGuire. She became interested in pursuing a music career after attending a Radio Disney concert in 2001. "There were all these pop acts backstage at the concert," Duff explained. "They were all getting ready backstage and warming up, and I was like, 'I want to do this so bad.'" One day, Duff met Andre Recke, who would soon become her manager. She told him of her interest in becoming a singer and briefly performed for him. This prompted him to tell her, "I want to work with you." Recke said of his encounter with Duff, "When I met Hilary, I knew she had something special. Sometimes you just have that feeling, that, 'Wow, she's a star.'"
"I Heard Santa on the Radio" and "Tell Me a Story (About the Night Before)" are duets with Christina Milian and Lil' Romeo, respectively, and "Same Old Christmas" features Duff's sister Haylie.Santa Claus Lane features production from Matthew Gerrard, Chris Hamm, Alain Bertoni, Charlie Midnight and Chico Bennett; on the 2003 reissue, the bonus track "What Christmas Should Be" is produced by Charlton Pettus.
Santa Claus Lane was released in the United States on October 15, 2002 by Walt Disney Records. It was reissued on October 14 of the following year with the bonus track "What Christmas Should Be", and released by Buena Vista Records. The song "Santa Claus Lane" had a music video featuring Duff performing on Disney's Movie Surfers to promote the film The Santa Clause 2. "Tell Me a Story (About the Night Before)" (featuring Lil' Romeo) also had a music video and a radio release, and was promoted heavily on Disney Channel. In a 2013 interview with the website Idolator, Duff expressed her dislike for "Tell Me a Story (About the Night Before)" , saying that she "honestly hate[s] that record — [and she has] blocked it out of [her] memory". Duff also remarked that she "[didn't] even remember" the song.
Santa Claus Lane received mixed reviews by music critics. An AllMusic editor gave the album three out of five stars. Jaan Uhelszki, in an editorial review for Amazon.com, gave Santa Claus Lane a negative review. She wrote the album, consisting mostly of Christmas covers, "add[s] little to the holiday music canon". She also felt that it only "perks up" on songs that feature guest musicians. Kelefa Sanneh considered for The New York Times it to be a "concept album" and it was "loosely inspired by Saint Nicholas, the fourth-century bishop of Myra." Erica Witte wrote for The Daily NorthwesternSanta Claus Lane makes "any Jewish girl cry" because the album "lack[s] of association with Christmas." Christopher Thelen gave a more positive review to the album. While writing for the Daily Vault, Thelen gave a B- grade and wrote it "does show there is a voice behind the pretty young face, even if this is a strange place to start one's recording career."