The original LP release featured on side one the songs of Newton-John, and on side two the songs of ELO. In 2008 the soundtrack album was digitally remastered as a bonus CD as part of the film's DVD release entitled Xanadu - Magical Musical Edition.
Although the film was a critical and commercial disappointment, the soundtrack was a worldwide success and received positive reviews from music critics going double platinum in the US and Canada. The hit singles "Magic" and "Xanadu", peaked at number one in the United States and United Kingdom, respectively. Both singles also went to number one in the Netherlands and Italy, respectively. It was the 5th most popular US soundtrack in 1981.
The soundtrack featured songs on side one by the film's star, Olivia Newton-John, written by her long-time producer, John Farrar. The songs on side two were written and performed by ELO. The title track which closed side two featured Newton-John as lead vocalist.
At the time of the album's release, Olivia Newton-John was signed to MCA Records, while ELO were signed to Jet Records. A compromise was worked out between the two companies in that the album was released on MCA in the US and Canada, and on Jet in the rest of the world.