Sinister was inspired by a nightmare Cargill had after watching the 2002 film The Ring. Principal photography on Sinister began in Autumn of 2011 in Long Island, New York with a production budget of $3 million. To add to the authenticity of old home movies and snuff films, the Super 8 segments were shot on actual Super 8 cameras and film stock. The film was a co-production between the United States, Canada, and the United Kingdom.

It premiered at the SXSW festival on March 10, 2012. It was released in the United Kingdom on October 5, 2012, and in the United States on October 12. Critics praised its acting, direction, cinematography and atmosphere, but panned its use of jump scares and other horror clichés. It was a box office success, grossing $87.7 million against its budget of $3 million. It has developed a reputation for scariness and is considered a cult classic. A 2020 study by Broadband Choices named Sinister the scariest film ever made, based on an analysis of viewer heart rates.