In October 1988, city officials of Detroit Michigan refused to invest more money to bring the Detroit circuit up to new Formula 1 regulations. This resulted in the cancellation of the Detroit race for the 1989 season. Phoenix city officials were interested in hosting major sporting event to promote city of Phoenix worldwide. Formula 1 race came into play after desperate attempt by Bernie Ecclestone not to lose USA grand prix. On Jan. 13 1989, the Phoenix City Council approved a five-year contract with F1 to promote and run the race, with event date June 4. It was well known Phoenix weather is very warm in June but no other slot was available because Phoenix got the race on a short notice. On the Thursday before qualifying, Formula Atlantic, the support category for the weekend, had the first practice session on the new track before the Formula One cars hit the circuit for pre-qualifying at 8 o'clock on Friday morning. The Atlantic session saw a couple of problems. A manhole cover was lifted and the track surface at turn 10 at the end of the back straight (Washington Street) had begun to break up in the same way Detroit and Dallas had done in the past. Overnight, quick-dry cement was used to patch up the broken surface and while dusty and bumpy, the cement held for the remainder of the weekend.
In qualifying on Friday, Ayrton Senna went progressively faster and faster, eventually posting a time 1.5 seconds ahead of McLaren team mate Alain Prost and the rest of the field. Senna's Friday time of 1:30.710 stood up through the second session and gave him his 34th career pole position, breaking Jim Clark's record of 33 which he had equalled in the previous race in Mexico.
The only American driver in the field, Phoenix native Eddie Cheever, qualified his Arrows-Ford in 17th place, some 3.1 seconds slower than pole man Senna.
During the morning practice on Saturday, Prost spun backward into a wall and damaged the monocoque and gearbox. It was the first monocoque Prost had broken since joining the team in 1984. Prost then had to take Senna's spare car for the race. Alessandro Nannini crashed his Benetton heavily in the morning warm-up session and was forced to start the race not only in the spare car but also wearing a neck brace due to a very sore neck.
Prost got a jump on Senna at the start, but hit a bump in the straight, causing his wheels to spin and the engine to be cut momentarily by the rev limiter allowing Senna to pull ahead, but by the end of the first lap his lead was only 0.45 seconds. Nannini ran third followed by Nigel Mansell, Alex Caffi, Stefano Modena, Martin Brundle, Gerhard Berger, Andrea de Cesaris and Michele Alboreto. Nannini's neck could only take 10 laps of racing before he pulled into the pits to retire. He had been third until a spin on lap four dropped him to eighth and retired after not being able to hold his head up properly and complaining of dizziness. After 16 laps, Senna's lead over Prost was 4.25 seconds. He suddenly doubled that on the next lap when Prost's engine began overheating, forcing the Frenchman to back off for a few laps in a bid to get the water and oil temperatures back to normal. Despite Senna's seemingly commanding position, Prost remained confident of winning as he had seen that his McLaren was handling better than his team mate's. He reasoned that later in the race his only problem would be getting past.
The gap between the two McLarens varied as they worked their way through traffic, but on lap 29, Prost closed the gap when Senna suffered a misfire. The problem disappeared momentarily, with Senna doing his fastest lap of the race, but then returned, worse than before. On lap 34, with Prost only one second back, Senna waved his team mate past and then pitted.
After two pit stops to change black box, battery and plugs, and with successive fastest laps in between, Senna retired on lap 44. It was his first retirement ever because of a Honda engine failure and the first failure of their V10 engine under race conditions. It was also only the second time in 21 races with McLaren that a Honda engine had failed, the first being when Prost's V6 turbo had blown up halfway through the 1988 Italian Grand Prix, the only race of the 1988 season that McLaren did not win.
Alex Caffi, who had started in sixth in his Pirelli shod Dallara-Ford, was up to second with Senna's retirement. A stop for new tires, after being passed by Berger (whose palms were still raw and sore from his Imola crash only six weeks before), dropped him back two more spots to fifth. As he tried to re-lap his team mate de Cesaris, however, de Cesaris turned in, forcing Caffi into the wall and out of the race. After the race de Cesaris said that he simply did not see Caffi and did not even know about putting him into the wall until after the race. De Cesaris continued on to an 8th-place finish. Berger's Ferrari suffered alternator failure (meaning no power to the revolutionary semi-automatic transmission) 9 laps after Caffi's retirement. Reporters tried to interview Berger but his mechanic closed the garage door, just before the garage door closed ESPN pit reporter saw Berger being splashed with water.
Throughout the race, Riccardo Patrese, Ivan Capelli and Eddie Cheever had been in close contact. When Capelli retired on lap 21 with a gearbox failure, Patrese and Cheever carried on the battle alone. After lap 51, the fight was for second place, with Patrese ahead. Despite a fuel pickup problem with his engine, Cheever mounted a challenge in the closing laps until his front brakes and one rear brake failed. He finished in third place.
As was predicted, the two-hour time limit was reached after 75 of the scheduled 81 laps, and Prost coasted to his only United States win (after not having won at Watkins Glen, Long Beach, Las Vegas, Detroit or Dallas), and increased his then all-time record victory total to 36 and his first win in a naturally aspirated car (his only other season in F1 without turbo power had been his rookie season with McLaren in 1980 when the team used the Cosworth DFV V8 engine). He also took the lead, by two points over Senna, in the Driver's Championship, which he eventually won. Patrese's runner-up placing was his second in a row. After struggling through practice, qualifying and warm up, and starting from 14th spot, Patrese and technical director Patrick Head had guessed at a setup and finally got it right for the race. Eddie Cheever's third place was the ninth and last podium finish of his F1 career. Christian Danner benefited from retirements ahead of him to take fourth place for Rial. It was his best career finish and matched the best ever finish for the team.
Before the race there was a push to reduce the number of race laps from 81 to 70 due to the expected hot weather and after practice times had revealed the race would hit the two hour mark well before the scheduled number of laps had been reached: with the track almost the same length as the Adelaide Street Circuit used for the Australian Grand Prix, the prediction was that laps times would be around the 1:15 to 1:20 mark. Qualifying times, however, had been some 10–15 seconds slower than predicted. Ken Tyrrell was the only team boss who refused to sign the document which would have allowed the race length to be reduced. In the race, Jonathan Palmer lost a certain 4th place when his Tyrrell-Ford ran out of fuel on lap 69. Had the race been flagged after 70 laps, Palmer would have finished 4th having already been lapped by Prost instead of running out of fuel and being classified as 9th and last. The organizers were slightly disappointed with a crowd of 31,441 turned out for the race on Sunday in 100 degrees Fahrenheit heat, having hoped for 40,000.Note: Only the top five positions are included for both sets of standings.