Director Mario Caiano initially wanted to highlight the gory scenes with red color. The idea was dropped due to budget limitations.

Director Mario Caiano stated that Nightmare Castle was born out of his passion for actress Barbara Steele and the Gothic genre, a style which he began to love between 1943 and '44 when he first read Edgar Allan Poe's work. Caiano said that he was not influenced by director Mario Bava, and did not remember seeing his films at the time with the possible exception of Black Sunday (1960).

The audio of Muriel Arrowsmith saying "you're a monster" is used in the song "Godzilla" by Eminem at the very beginning, then again towards the end just saying "monster"

Nightmare Castle has been released on DVD by several companies including Severin Films, Alpha Video and Retromedia in the United States. A Blu-ray of the film was released by Severin Films on August 11, 2015. The release includes two extra films starring Steele: Castle of Blood and Terror-Creatures from the Grave.

Nightmare Castle serves as the inspiration for the Misfits song Hybrid Moments. During the Chicago reunion performance of the Misfits in April 2019, scenes from Nightmare Castle accompanied the performance of the song.

Caiano's father Carlo was the producer of the film and was given a low budget to work with. With his friend art director Bruno Cesari, Caiano shot at Villa Parisi in Frascati and at Incir-De-Paolis Studios in Rome over 18 days.

Nightmare Castle was released in Italy on 16 July 1965 where it was distributed by Emmeci. The film grossed a total of 154 million Italian lire on its theatrical release. The film was released by Allied Artists Pictures in the United States on 5 July 1966, shortly before the studio's initial demise.

The initial script treatment for the film was titled Orgasmo and re-uses ideas from Poe's "The Tell-Tale Heart".