This is the first theatrical film by director Brian Henson in 22 years, since Muppet Treasure Island (1996).
Sesame Workshop sued the team behind the film for it's tagline, "No sesame. All street" claiming that the film tarnishes their reputation.
This plot is similar to Who Framed Roger Rabbit (1988) where in this film, real puppets live in a world with real humans much like cartoon characters live in a real world with humans. However, this film is rated R while Roger Rabbit was originally rated PG.
Melissa McCarthy and Maya Rudolph previously starred together in Bridesmaids (2011) and Life of the Party (2018).