In 1965, Sebastian's group, The Lovin' Spoonful, released the song as the first single from their debut album Do You Believe in Magic. The song was well received by the public and became a top ten hit on the Billboard Hot 100, peaking at #9. According to the lyrics, the magic referenced in the title is the power of music to supply happiness and freedom to both those who make it and those who listen to it. Session drummer Gary Chester played on the track.
In the 1987 show Barbie and The Rockers episode "Out Of This World", Barbie and The Rockers sing a cover of the song as they prepare to do a concert in outer space.
In a 2007 DVD entitled "The Lovin' Spoonful with John Sebastian - Do You Believe in Magic", author Sebastian illustrates how he sped up the three-chord intro from Martha and the Vandellas' "(Love Is Like a) Heat Wave" to come up with the intro to "Do You Believe in Magic".
In 1992, McDonald's used a rewritten version of the song for some of their commercials, replacing all of the lyrics (except for the first line) with ones pertaining to their talking Happy Meal items and Ronald McDonald.