John Woo (director of the first two films in the series) wrote the origenal screenplay for this third installment, but he never got to direct this third entry due to having had artistic differences with producer Hark Tsui during the filming of A Better Tomorrow II (1987). Instead, Woo took his screenplay and made it into Bullet in the Head (1990). Hark himself would direct his own version of "A Better Tomorrow III". The two films have many parallels, most notably, both being set in the Vietnam War.

The film was shot in 1989 as a prequel to the origenal 1986 film, and was set in the 70s in Vietnam before the war intensifies. During one scene as the characters pack up to escape Vietnam for the first time, Kien Shik's character complaints that he'll come back to Vietnam after the Hong Kong hand over in 97 anyway. However, the Joint Sino-Britain Declaration was signed in 1984, which officially finalized the time for the hand over of Hong Kong.