Her previous album Illuminations having sold so poorly as to lose Vanguard a considerable sum of money, the label placed considerable pressure on Sainte-Marie to come up with something that would sell in larger numbers. To this effect, She Used to Wanna Be a Ballerina was recorded with guitar from Ry Cooder and Neil Young and assistance from the latter's backing band Crazy Horse. There was also a change in focus of the material: covers of contemporary songs, which she had almost never recorded before, accounted for five of the eleven songs. Vanguard boss Maynard Solomon, who had produced her first five albums and most of Illuminations, surrendered production duties completely to Neil Young producer Jack Nitzsche, who was later to marry Sainte-Marie after she wrote "Up Where We Belong" with him in the early 1980s.
This label-driven effort to achieve increased commercial success did briefly pay off when "Soldier Blue", the theme song from the movie of the same name reached number 7 in the UK Singles Chart and was a hit throughout Europe. It failed to chart in the States, however, and the album barely dented the Billboard Top 200, which served to strain the relationship between Sainte-Marie and Vanguard and paved the way for their split in 1973 after Quiet Places.