The album contains three songs that became standards in Young's performance repertoire: "Cinnamon Girl", "Down by the River" and "Cowgirl in the Sand", all of which were written in a single day while Young had a 103 °F (39.5 °C) fever. In 2003, the album was ranked number 208 on Rolling Stone magazine's list of the 500 greatest albums of all time. Young's lead vocal track on the song "Everybody Knows This Is Nowhere" (on the original album) was actually a temporary scratch vocal he sang through the low quality talk-back microphone on the mixing board, with no effects such as reverb. Young liked the stark contrast to the rest of the recording, which became one of his many innovations.
Everybody Knows This Is Nowhere was remastered and released on HDCD-encoded compact disc and digital download on July 14, 2009, as part of the Neil Young Archives Original Release Series. It was released on audiophile vinyl in December 2009, both individually and as part of a box-set of Young's first four LPs available via his official website. (This box set was limited to 1000 copies. A CD version of 3000 copies exists, too.) A high resolution digital Blu-ray disc is planned, although there has been no release date set.
Upon release, Everybody Knows This Is Nowhere received generally favorable reviews from critics. Bruce Miroff of Rolling Stone wrote a favorable review, describing Young's voice as "perpetually mournful, without being maudlin or pathetic. It hints at a world in which sorrow underlies everything [...] because that world is recognizable to most of us, Young's singing is often strangely moving." Despite stating that "in several respects [the album] falls short of his previous effort" and that "the lyricism of the first album can only be found in faint traces," he went on to state that the album "offers ample rewards. Young's music partially makes up for its lack of grace by its energy and its assurance." Robert Christgau rated the album a B+, stating that "Young is a strange artist and I am not all the way into him yet, but this record is haunting."
However, later reviews have been more positive. William Ruhlmann of music database website Allmusic rated the album five out of five stars. Ruhlmann stated that "released only four months after his first [album], [it] was nearly a total rejection of that polished effort." He noted that "Cinnamon Girl," "Down by the River," and "Cowgirl in the Sand" were "useful as frames on which to hang the extended improvisations Young played with Crazy Horse and to reflect the ominous tone of his singing." He concluded that the album "set a musical pattern Young and his many musical descendants have followed ever since [...] and a lot of contemporary bands were playing music clearly influenced by it." Mark Richardson of Pitchfork Media rated the album 10 out of 10 points, stating that "the opening riff to 'Cinnamon Girl' erases the memory of Neil Young completely in about five seconds" and that "Crazy Horse were loose and sloppy, privileging groove and feeling above all." He also said that "Young sounds comfortable and confident, singing with the versatile voice that has changed remarkably little in the 40 years since" and concluded that it "was a sort of big bang for Young, a dense moment of creative explosion that saw possibilities expanding in every direction."