In the episode, Homer dissociates himself from new family friend John after discovering that John is gay. Homer fears that John will have a negative influence on Bart. "Homer's Phobia" was the first episode to revolve entirely around lesbian, gay, bisexual, and transgender (LGBT) themes, with the title being a pun on the word homophobia. Originally, due to the controversial subject, the Fox censors found the episode unsuitable for broadcast, but this decision was reversed after a turnover in the Fox staff. It won four awards, including an Emmy for Outstanding Animated Program (For Programming One Hour or Less) and a GLAAD Media Award for "Outstanding TV - Individual Episode".
Homer endeavors to make Bart more masculine by forcing him to look at a cigarette billboard featuring scantily clad women in hopes Bart will be attracted to girls, but instead Bart gets the urge to smoke "anything slim." Homer then escorts him to see a steel mill’s muscle-bound workforce, only to find that the factory in question moonlights as The Anvil, a gay disco. A desperate Homer insists on taking Bart deer hunting with Moe and Barney. When they cannot find any deer, they decide instead to go to Santa's Village and shoot the reindeer in the corral. This backfires when the reindeer attack them. John, with the help of Lisa and Marge, uses a Japanese Santa Claus robot to scare off the reindeer and save the hunting party. Homer accepts John, more or less, and tells Bart, who is still unaware of his father's concerns, that any way he lives his life is fine with him. After Lisa informs Bart that Homer thinks he is gay, Bart is stunned. The episode ends with everyone driving off in John's car.
Just before the end credits a dedication to the steelworkers of America is shown, reading "Keep reaching for that rainbow!"
The original concept for the episode came from a few lines of show ideas written by George Meyer. One of them read "Bart the homo", and Ron Hauge was selected to write the episode, with the story stemming from that line. The idea of using John Waters as a guest star had been around for a while. Showrunners Bill Oakley and Josh Weinstein had planned to use him in an episode called "Lisa and Camp", which revolved around Lisa "discovering the joys of campy things". Their idea was combined with Meyer's and it became this episode. The episode was originally entitled "Bart Goes to Camp", but was renamed because the joke was too oblique.
John Waters accepted his invitation to be a guest star instantly, stating that if it was good enough for Elizabeth Taylor, who appeared in the season four episode "Lisa's First Word", it was good enough for him. He joked, however, about a negative reaction if his character would be made to look like Richard Simmons. As thanks for his performance, the show's staff sent Waters an animation cel from the episode which he now has hanging in his office.
According to commentary on the eighth season DVD, the Fox censor objected to "Homer's Phobia" being aired. The normal procedure is for an episode's script to be sent to the censor and then faxed back with a list of lines and words that should be substituted. However this episode came back with two pages of notes about almost every single line in the show. The censors stated that they did not like the use of the word "gay", or the discussion of homosexuality at all, and closed with a paragraph which stated that "the topic and substance of this episode are unacceptable for broadcast". Usually the censor notes are ignored as the offending lines and problems are dealt with after the episode has been animated. In this case the entire episode was deemed a problem, so it could not be solved in this way. The staff asked Waters if he thought the gay community would find the episode offensive. Homer's use of the word "fag" to insult John was his only problem, so the writers changed it to "queer". The censor problems ultimately came to nothing as when the episode came back from animation in South Korea, the then-Fox president had just been fired and replaced, with the censors being replaced as well. The new censors sent back merely one line: "acceptable for broadcast".
The "gay steel mill" scene was written by Steve Tompkins. He first pitched that they would be longshoremen, but it was too much work to animate the lading of ships, so a steel mill was used instead. Tompkins also wrote a different third act for the episode, which was not used in the final cut. Instead of Homer, Bart, Barney and Moe going deer hunting and ending up at "Santa's Village", they would go back to the steel mill. There, Homer would attempt to prove his heterosexuality by having a human tractor pulling contest with some of the steel mill workers. It was decided that it "didn't really service the story" and was dropped.
In its original American broadcast, "Homer's Phobia" finished tied for 47th place in the weekly ratings for the week of February 10–16, 1997 with a Nielsen rating of 8.7. It was the fourth highest rated show on the Fox Network that week. Warren Martyn and Adrian Wood stated in their book I Can't Believe It's a Bigger and Better Updated Unofficial Simpsons Guide, that: "Only The Simpsons could do this so tongue-in-cheek that nobody could get in a tizzy about it. Very good indeed." John Alberti praised the episode's critiquing of "the most common misconception about homosexuality: namely that gayness is somehow contagious", as well as its other themes. In his review of The Simpsons - The Complete Eighth Season DVD, Todd Gilchrist said that "Homer's Phobia" "certainly qualifies as one of the all-time greatest episodes. When the episode aired, the production team received "very few" complaints about its content, with most of the response being positive. It was placed fifth on Entertainment Weekly's top 25 The Simpsons episode list. In 2003, USA Today published a top 10 chosen by the webmaster of The Simpsons Archive, which had this episode listed in tenth place. It was again placed tenth on AskMen.com's "Top 10: Simpsons Episodes" list, with The Screen Directory placing it fifth on their list. IGN.com ranked John Waters's performance as the ninth best guest appearance in the show's history, with TV Guide naming him the third best film related guest star. In a 2008 article, Entertainment Weekly named Waters as one of the sixteen best Simpsons guest stars.
In 2002, Off the Telly writers Steve Williams and Ian Jones named "Homer's Phobia" one of the five worst episodes of The Simpsons, stating that it "leaves such a nasty taste in the mouth", as Homer is "quite simply a bastard" throughout the course of the episode. The pair concluded by saying "this is a side of the show we'd not seen before, nor particularly wanted to see. In June 2003, Igor Smykov sued the Russian television channel REN TV on claims that The Simpsons, along with Family Guy, were "morally degenerate and promoted drugs, violence and homosexuality." As evidence, "Homer's Phobia" was shown to the judge to prove that The Simpsons promoted homosexuality, and thus should not be aired again on the channel. The case was thrown out after one day.