Despite performing poorly at the box office, the film was nominated for several awards, including Golden Globes for Best Director and Best Picture (Drama) and Oscars for Best Art Direction (Richard Sylbert, George Gaines) and Film Editing. The film, however, also earned a Razzie Award nomination for Diane Lane as Worst Supporting Actress.
A musician named Dixie Dwyer begins working with mobsters to advance his career but falls in love with the girlfriend of gangland kingpin Dutch Schultz.
A dancer from Dixie's neighborhood, Sandman Williams, is hired with his brother by the Cotton Club, a jazz club where most of the performers are black and the customers white. Owney Madden, a mobster, owns the club and runs it with his right-hand man, Frenchy.
Dixie becomes a Hollywood film star, thanks to the help of Madden and the mob but angering Schultz. He also continues to see Schultz's moll, Vera Cicero, whose new nightclub has been financed by the jealous gangster.
In the meantime, Dixie's ambitious younger brother Vincent becomes a gangster in Schultz's mob and eventually a public enemy, holding Frenchy as a hostage.
Sandman alienates his brother Clay at the Cotton Club by agreeing to perform a solo number there. While the club's management interferes with Sandman's romantic interest in Lila, a singer, its cruel treatment of the performers leads to an intervention by Harlem criminal "Bumpy" Rhodes on their behalf.
Dutch Schultz is violently dealt with by Madden's men while Dixie and Sandman perform on the Cotton Club's stage.
Inspired to make The Cotton Club by a picture-book history of the famous nightclub by James Haskins, Robert Evans was the film's original producer and also wanted to direct. He hired William Kennedy and Francis Ford Coppola to re-write Mario Puzo's story and screenplay. Evans eventually decided that he did not want to direct the film and asked Coppola at the last minute. Richard Sylbert claimed that he told Evans not to hire Coppola because "he resents being in the commercial, narrative, Hollywood movie business". Coppola claimed that he had letters from Sylbert that ask him to work on the film because Evans was crazy. The director also said that "Evans set the tone for the level of extravagance long before I got there".
Coppola accepted the jobs as screenwriter and then director because he needed the money – he was deeply in debt from making One from the Heart with his own money. By the time Evans decided not to direct and brought in Coppola, at least $13 million had already been committed. Las Vegas casino owners Edward and Fred Doumani put $30 million into the film. Other financial backers included Arab arms dealer Adnan Khashoggi, and vaudeville promoter Roy Radin, who was eventually murdered. According to William Kennedy in an interview with Vanity Fair, the budget of the film was $47 million. However, Coppola told the head of Gaumont, Europe's largest distribution and production company, that he thought the film might cost $65 million.
According to Splitsider, Richard Pryor was considered for the role of Sandman Williams. Robert Evans wanted to cast his friend Alain Delon in a two-scene role as Lucky Luciano but this did not eventuate. The role of Luciano was instead portrayed by Joe Dallesandro, starting the dramatic film career for the former Warhol Superstar.
Author Mario Puzo was the original screenwriter and was eventually replaced by William Kennedy who wrote a rehearsal script in eight days which the cast used for three weeks prior to shooting. According to actor Gregory Hines, a three-hour film was shot during rehearsals.
Over 600 people built sets, created costumes and arranged music at a reported $250,000 a day.
From July 15 to August 22, 1983, 12 scripts were produced, including five during one 48-hour non-stop weekend. Kennedy estimates that between 30–40 scripts were turned out.
On June 7, 1984, Victor L. Sayyah filed a lawsuit against the Doumani brothers, their lawyer David Hurwitz, Evans and Orion Pictures for fraud and breach of contract. Sayyah invested $5 million and claimed that he had little chance of recouping his money because the budget escalated from $25 to $58 million. He accused the Doumanis of forcing out Evans and that an Orion loan to the film of $15 million unnecessarily increased the budget. Evans, in turn, sued Edward Doumani to keep from acting as general partner on the film.
The Cotton Club was released on December 14, 1984 and grossed $2.9 million on its opening weekend, fourth place behind Beverly Hills Cop, Dune, and 2010. Robert Evans took the blame for hiring Coppola while the director responded that if he had not been hired, the film would have never been made. Evans claimed that Coppola made the budget escalate dramatically by rejecting the script, hiring his own crew, and falling behind schedule.
The film appeared on videotape in April 1985. It was the first to use the Macrovision copy protection system.
The film appeared on both Siskel and Ebert's best of 1984.
In 2015, Coppola found an old Betamax video copy of his original cut that ran 25 minutes longer. When originally editing the picture, he acquiesced to distributors who wanted a shorter film with different structure. Between 2015 and 2017 Coppola spent over $500,000 of his own money to restore the film to the original cut. This version, titled The Cotton Club Encore and running 139 minutes, debuted at the Telluride Film Festival on September 1, 2017.