The song was the centerpiece in Jackson's musical film Moonwalker, featuring Joe Pesci. In the film, Jackson plays with his young friends outdoors when they come upon a cave, which leads to a kind of dream world in which "Mr. Big" Frankie Lideo has been selling drugs to youths in order to get everyone hooked. The "Mr. Big" character was a play on the name of Michael's manager, Frankie Dileo. In the movie, Joe Pesci is often heard repeating his character's last name, "Lideo, L-I-D-E-O, They never spell my name right." This was an inside joke between Jackson and Dileo. "Smooth Criminal" was presented in a ten-minute long clip in which Jackson dances through a 1930s-style nightclub (known in the film as "Club 30s"). The version of the song used in the clip is different from the album version: the background beats are different, there are several new lyrics (see below), and the song is much longer overall. The version of the video that is usually aired on network television is 4 minutes long and is merely a sped up version of the clip from the film. Jackson briefly moonwalks before the famous anti-gravity lean. The ten minute long "Smooth Criminal" clip is reminiscent of the musical number known as "The Girl Hunt Ballet" which is featured as the final number in the 1952 musical film The Band Wagon starring Fred Astaire and Cyd Charisse. "The Girl Hunt Ballet" is a spoof of Mickey Spillane's hard-boiled detective novels.

"Smooth Criminal" was a song that almost didn't make it into the Bad album. With the final decision to include the song, Jackson originally decided to make the music video a western-styled short film. However, he later decided to change the style into a 1930s nightclub style.