Goodman got the idea while traveling on the Illinois Central line for a visit to his wife's family. The song has been recorded by numerous artists both in the US and Europe, including two major hit versions: first by Arlo Guthrie in 1972, and later by Willie Nelson in 1985.
While at the Quiet Knight bar in Chicago, Goodman saw Arlo Guthrie, and asked to be allowed to play a song for him. Guthrie grudgingly agreed, on the condition that if Goodman would buy him a beer, Guthrie would listen to him play for as long as it took to drink the beer. Goodman played "City of New Orleans," which Guthrie liked enough that he asked to record it. The song was a hit for Guthrie on his 1972 album Hobo's Lullaby, reaching #4 on the BillboardEasy Listening chart and #18 on the Hot 100 chart; it would prove to Guthrie's only top-40 hit and one of only two he would have on the Hot 100 (the other was a severely shortened and rearranged version of his magnum opus "Alice's Restaurant," which hit #97).
