The title of the record, Through the Looking Glass, was an ode to Lewis Carroll's book of the same name. The band had already been inspired by Carroll's work when naming their label, Wonderland, which was derived from Alice in Wonderland. The record was also an ode to David Bowie's Pin Ups, a covers album recorded in the early 1970s. After spending more than a year working on 1986's Tinderbox, the Banshees wanted spontaneity, and quickly returned to the studio after the tour, to record their own covers album. It was a project they had been considering since recording a version of The Beatles's "Dear Prudence" in 1983.
For the Looking Glass sessions, which took place in September and October 1986, they chose material mainly dating from the first half of the 1970s, from an era preceding the 1976 formation of their band. Most of the songs were from artists who had influenced them: Roxy Music, John Cale, Iggy Pop, The Doors and Kraftwerk. Producer Mike Hedges, who hadn't worked with them since 1984, was called back. The instrumentation was different; for this album, they hired other instrumentalists including a brass section and a harpist. Musician Martin McCarrick, who became an official member of the Banshees after this album, created string arrangements for several tracks.
The band's version of Iggy Pop song "The Passenger" featured brass arrangements. Pop praised the arrangement, saying: "That's good. She sings it well and she threw a little note in when she sings it, that I wish I had thought of. It kind of improves it [...]. The horn thing is good".
Through the Looking Glass was released on 2 March 1987 on Polydor. A few weeks after, Bowie contacted them to be the special guests at two shows on his Glass Spider Tour in Anaheim. This album was reissued in a remastered version with bonus tracks in October 2014.
Sounds said: "Trust in Me", "Potentially a single, is quite astonishing. Whereas once it was about a python getting ready to crush a little boy to death, now it's a harp-laden lullaby of rampant, swirling eroticism".Mojo retrospectively praised their version of "Strange Fruit" by selecting it for a 2007 CD called Music Is Love: 15 Tracks That Changed the World Recovered By.... In a retrospective review, AllMusic hailed the album, saying: "The inspired range of covers reaches from glam-era landmarks (Roxy Music's 'Sea Breezes', John Cale's 'Gun') to Billie Holiday's sorrowful touchstone 'Strange Fruit' to, in one of the best such efforts ever (and a year before Hal Willner's Stay Awake project), a Disney classic—namely the slinky 'Trust in Me', originally from The Jungle Book and given a spare, mostly-Budgie backing that could almost be a sparkling Creatures outtake".