The song was originally released as a single by the Isley Brothers (who had a huge hit with "Twist and Shout") as "Testify - Part I and II" in 1964. It was one of the two singles to feature Jimi Hendrix on guitar, the other being "Move Over and Let Me Dance".

Texas Flood was recorded in Los Angeles during Thanksgiving weekend at Jackson Brown's recording studio over three days. Brown invited the group to record a demo free of charge after seeing them perform at the Montreux Jazz Festival in 1982.

Bassist Tommy Shannon recalls of the sessions, "It really was just a big warehouse with concrete floors and some rugs thrown down. We just found a little corner, set up in a circle looking at and listening to each other and played like a live band." Vaughan used two Fender Vibroverbs and an 150-watt Dumbleland Special owned by Browne. In a 2003 interview in Guitar World, engineer and co-producer, Richard Mullen had this to say about the production techniques on Texas Flood: "Just one mic on everything. I used two Shure SM57s on his guitar amps—one on a Fender Vibroverb with a 15-inch Altec Lansing speaker, and one on a Dumble 4x12" bottom (with Electro-Voice speakers) connected to a Dumble head. Stevie played through two Vibroverbs, but I only miked one of the speakers in one of them. I positioned the mics about three or four inches off the cabinet at about a 45 degree angle to the cone. The only effect he used was an Ibanez Tube Screamer."