Following McCartney II's release, Wings regrouped in October 1980 to begin what would be their final recording sessions, whereby several songs later to appear on Tug of War and Pipes of Peace were rehearsed and recorded. Feeling the need for direction, McCartney called upon his old producer, George Martin, to begin recording a song written for the animated Rupert Bear character (to which McCartney owned the rights), entitled "We All Stand Together", among others. The productive sessions continued until 9 December, the morning McCartney woke up to discover his old songwriting partner and fellow ex-Beatle, John Lennon, had been shot and killed the night before in New York City. Abandoning that day's session part-way through (where he and Denny Laine were recording future B-Side "Rainclouds"), both Martin and McCartney felt it was best to leave the project for the time being and start anew once they were ready.
In February 1981, two months after Lennon's death, Paul McCartney resumed his sessions, recording that month with Stevie Wonder, Stanley Clarke, Carl Perkins and Ringo Starr and laying down several songs in the process. The recordings were held at AIR Studios in Montserrat, in the Caribbean and lasted from 3 February to 2 March, ending with Ebony and Ivory and What's That You're Doing, two songs featuring Stevie Wonder.10cc guitarist Eric Stewart also became a frequent collaborator of McCartney's during this era. Further sessions that summer were also undertaken at George Martin's AIR studios at Oxford Street, London – with the producer manning the controls and giving McCartney's music the benefit of 1980s technology. The sessions were so productive that several of its tracks would be held over for the next album, Pipes of Peace, which followed in 1983. The rest of 1981 would be spent in a quiet fashion, with McCartney and Martin touching up the album and perfecting it.
In a contemporary review for Rolling Stone, music critic Stephen Holden hailed Tug of War as "the masterpiece everyone has always known Paul McCartney could make", particularly because of its vivid music and consistent songwriting.Robert Palmer was less enthusiastic in his review for The New York Times and found the album "exquisitely crafted though lyrically flawed", as he thought McCartney's lyrics were banal and mawkishly sentimental.
In March 1982, McCartney's duet with Stevie Wonder, "Ebony and Ivory", was released to broad acclaim. It reached number 1 in many countries and did much to restore McCartney's critical reputation after what was viewed as a lean period for him. Consequently, when Tug of War appeared in April, it was an immediate worldwide number 1, selling several million copies and was received strongly by the public, even being nominated for the "Album of the Year" Grammy in 1983. The follow-up single "Take It Away" was a US Top 10 entry as well.
The album, along with McCartney's Ram and Wings over America albums, was issued in the US on compact disc on 18 January 1988. In 1993, Tug of War was remastered and reissued on CD as part of "The Paul McCartney Collection" series. There were no bonus tracks: "Rainclouds" and "I'll Give You a Ring", B-sides of "Ebony and Ivory" and "Take It Away", respectively, were omitted. In 2007, Tug of War was remastered and re-released on the iTunes Store adding a solo version of "Ebony and Ivory".