Stanley Kubrick made the cast of The Shining (1980) watch this film (among others) to get in the mood for filming a horror picture.
When production on the film took longer than expected, David Lynch had to sleep in the same room used as Henry's bedroom for over a year.
Though only released at first as a "midnight movie," a number of Hollywood A-list directors saw the film and were impressed by it. John Waters, whose Pink Flamingos (1972) and Female Trouble (1974) played the same venue, often mentioned Eraserhead as a favorite film, urging viewers to see it. Stanley Kubrick reportedly said the same; this was one of the films he made the cast and crew of The Shining (1980) watch to get in the right frame of mind. Mel Brooks saw it and offered Lynch the chance to direct The Elephant Man (1980); Lynch accepted. George Lucas asked Lynch to direct Star Wars: Episode VI - Return of the Jedi (1983); Lynch turned it down.
The film's tone was also shaped by David Lynch's time living in a troubled neighborhood in Philadelphia. Lynch and his family spent five years living in an atmosphere of "violence, hate and filth." The area was rife with crime, inspiring the bleak urban backdrop of the film. Describing this period of his life, Lynch said "I saw so many things in Philadelphia I couldn't believe ... I saw a grown woman grab her breasts and speak like a baby, complaining her nipples hurt. This kind of thing will set you back."
David Lynch had a lot of trouble getting financial assistance from the American Film Institute (AFI), because the script was only 20 pages long. He received a grant from AFI but after about 3 years of production, he ran out of money. At one point Terrence Malick screened the film for a potential financial backer, who walked out, calling the movie "bullshit."