This song is about a girl who claimed Jackson was the father of her child. Jackson based it on a woman who used to stalk him, writing him letters about a son she thought was his. Jackson rarely spoke about this woman, but he had a very hard time dealing with this unwanted attention and became more reclusive as a result. The song was his way of expressing his feelings without addressing her directly. While Jackson didn't give many details about the real Billie Jean, his producer Quincy Jones said that Jackson found the woman one day lounging by his pool with a bathing suit and sunglasses on. According to Jones, she accused Jackson of being the father of one of her twins, which Jones thought was pretty funny.

In his autobiography Moonwalk, Jackson said that Quincy Jones wanted to change the title to "Not My Lover" because he thought it would be confused with the tennis star Billie Jean King. Jackson ended up winning that battle.

Michael Jackson said of this song in Moonwalk, "A musician knows hit material. It has to feel right. Everything has to feel in place. It fulfills you and it makes you feel good. You know it when you hear it. That's how I felt about 'Billie Jean.' I knew it was going to be big while I was writing it. I was really absorbed in that song. One day during a break in a recording session I was riding down the Ventura Freeway with Nelson Hayes, who was working with me at the time. 'Billie Jean' was going around in my head and that's all I was thinking about. We were getting off the freeway when a kid on a motorcycle pulls up to us and says, 'Your car's on fire.' Suddenly we noticed the smoke and pulled over and the whole bottom of the Rolls-Royce was on fire. That kid probably saved our lives. If the car had exploded, we could have been killed. But I was so absorbed by this tune floating in my head that I didn't even focus on the awful possibilities until later."