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This was written by the husband-and-wife team of Dan Peek and Catherine Peek. "Lonely People" was written as an optimistic response to the Beatles' song "Eleanor Rigby". Dan Peek considered "Eleanor Rigby" an "overwhelming" "picture...of the masses of lost humanity, drowning in grey oblivion" and would recall being "lacerated" on first hearing the lyrics of its chorus which run "All the lonely people: where do they all come from...where do they all belong". "Lonely People" was written within a few weeks of Dan Peek's 1973 marriage to Catherine Mayberry: Peek- "I always felt like a melancholy, lonely person. And now [upon getting married] I felt like I’d won... It's possible to drink from another's well of experience...and be refreshed."

America was formed in London in 1970 by Dewey Bunnell, Dan Peek, and Gerry Beckley. The trio met as sons of US Air Force personnel stationed in London, where they began performing live. Peek left for the United States for a failed attempt at college during 1969. Soon after his return to the UK the following year, the three began making music together. Starting out with borrowed acoustic guitars, they developed a style that incorporated three-part vocal harmony.

In May 1977, Dan Peek left the band. He recently had renewed his Christian faith after years of recreational drug use and had begun to seek a different artistic direction from Beckley or Bunnell; the break with the band was amicable.