The song was written by Lennon in January 1966, after reading The Psychedelic Experience: A Manual Based On The Tibetan Book Of The Dead by Timothy Leary, Richard Alpert and Ralph Metzner, and consuming LSD. The title for the song never appeared in the song's lyrics, but came from a malapropism spoken by Ringo Starr in an interview. An original working title for the song was "The Void", mentioned in the lyrics. Lennon said, "That's me in my Tibetan Book Of The Dead period, and the expression 'Tomorrow Never Knows' was another of [Ringo's malapropisms] which was like A Hard Day's Night, and take the edge off of the heavy philosophical lyrics."
Lennon first played the song to Brian Epstein, George Martin and the other Beatles at Epstein's house in Belgravia. McCartney remembered that even though the song was only one chord of C, George Martin accepted it and said that it was "rather interesting". The song's harmonic structure is derived from Indian music, and is based upon a C drone. The "chord" over the drone is generally C major, with some changes to B flat major.
Lennon told producer Martin that he wanted the vocals to sound like one hundred chanting Tibetan monks, which was a difficult task for Martin with the equipment available. Geoff Emerick, the newly hired engineer, replacing Norman Smith, suggested putting Lennon's voice through a Leslie speaker, the speaker usually wired up to a Hammond organ. This gave Lennon's voice the vibrato effect heard after the instrumental. The studio technical manager Ken Townsend created the world's first ADT system, and it was used on Lennon's vocals in place of doing a second take of the vocals, a process Lennon hated.
As one of the first pieces of psychedelic rock, the song uses various experimental tape loops, as well as reversed cymbals, processed drums and vocals, and sitar and a tamboura drone, similar to George's later composition, "Within You Without You". Tape loops were made by McCartney at home, after experimenting with tape recorders. These tape loops contained a seagull effect (which was actually Paul's laughter), an orchestral chord in B flat, a rapid sitar-sounding scale, the guitar solo from "Taxman" (transposed down two), and a few other sounds.