Eldorado is the first complete ELO concept album; bandleader Jeff Lynne conceived the storyline before he wrote any music. The plot follows a Walter Mitty-like character who journeys into fantasy worlds via dreams, to escape the disillusionment of his mundane reality. Lynne began to write the album in response to criticisms from his father, a classical music lover, who said that Electric Light Orchestra's repertoire "had no tune". The influence of The Beatles is prevalent, especially in the melody of the verse of "Mister Kingdom" which to some degree resembles the Beatles' "Across the Universe".
Eldorado marks the first album on which Jeff Lynne hired an orchestra; on previous albums, Lynne would overdub the strings.Louis Clark co-arranged, with Lynne (and keyboardist Richard Tandy), and conducted the strings. The group's three resident string players continued to perform on recordings, however, and can be heard most prominently on the songs "Boy Blue" and "Laredo Tornado". Mike de Albuquerque departed early on in the recording process, as touring made him feel separated from his family. Lynne plays most of, if not all, the bass tracks and backing vocals for the album, even though de Albuquerque received credit. Nevertheless, de Albuquerque was involved in some of the released album, if not as prominently as previous albums. Kelly Groucutt replaced de Albuquerque for the subsequent tour, when cellist Melvyn Gale also joined (replacing the departing Mike Edwards). "Eldorado Finale" is heavily orchestrated, much like "Eldorado Overture". Jeff Lynne said of the song, "I like the heavy chords and the slightly daft ending, where you hear the double bass players packing up their basses, because they wouldn't play another millisecond past the allotted moment."
"Can't Get It Out of My Head" was released as a single (with "Illusions in G Major" as the B-side) and was a success in the US. An edited version of "Boy Blue" was released as the album's second single, but failed to make any commercial impact. The album was certified Gold in the United States soon after its release. The album and singles, however, failed to find a wide audience in the band's native United Kingdom.