Produced at the National Film Board of Canada in Montreal, the film uses the technique known as pixilation, an animation technique using live actors as stop-motion objects. McLaren created the soundtrack of the film by scratching the edge of the film, creating various blobs, lines, and triangles which the projector read as sound.
Two men (Jean Paul Ladouceur and Grant Munro) live peacefully side by side in houses made of cardboard, but when a flower blooms between both their houses, they fight each other to the death over the ownership of the single small flower.
"I was inspired to make Neighbours by a stay of almost a year in the People's Republic of China. Although I only saw the beginnings of Mao's revolution, my faith in human nature was reinvigorated by it. Then I came back to Quebec and the Korean War began. (...) I decided to make a really strong film about anti-militarism and against war." — Norman McLaren
However, the version of Neighbours that ultimately won an Oscar was not the version McLaren had originally created. In order to make the film palatable for American and European audiences, McLaren was required to remove a scene in which the two men, fighting over the flower, murdered the other's wife and children.
During the Vietnam War, public opinion changed, and McLaren was asked to put the sequence back in. The original negative of that scene had been destroyed, so it was salvaged from a positive print of lower quality.
McLaren followed Neighbors with two other films using a similar combination of pixilation, live action, variable speed photography and string-puppets. The first, A Chairy Tale (1957) was a collaboration with Claude Jutra and Ravi Shankar. The second, Opening Speech by Norman McLaren (1960) was made for the International Film Festival of Montreal, and starred McLaren himself.
This film has been designated and preserved as a "masterwork" by the Audio-Visual Preservation Trust of Canada, a charitable non-profit organization dedicated to promoting the preservation of Canada’s audio-visual heritage.
Extreme's video for their first single, Rest in Peace, from their third album III Sides To Every Story, was closely modelled after Neighbours. The NFB took legal action and the matter was settled out of court, with withdrawal of the video from circulation.