Mellencamp wrote the song about his experiences growing up in a small town in Indiana, having been born in Seymour, Indiana, and living in Bloomington, Indiana, which, at the time of the release of the song, was much smaller. The music video has references to both towns. After that, Mellencamp has been known as champion of "small town America."

The song utters "small town" a total of 18 times.

As a promotion for this song, John Cougar played 2 free concerts in the small town of Chillicothe, Ohio where two-thirds of the population signed a petition asking him to play. He performed at the Ohio University-Chillicothe branch on University Drive. At the time, CNN was the only major news carrier, they were at the event with cameras in hand.

NBA legend and fellow Indiana native Larry Bird used this song on his retirement ceremony in 1993, particularly referring his town French Lick, Indiana as a "small town". It was also used for him in the NBA Superstars video series.

While performing for the NFL Kickoff Special on NBC on September 6, 2007 some of the well-known lyrics were changed. "My wife was 13 when I wrote this song" being among the more humorous of lines not in the original.

The song was also used as the theme song for the Discovery Times documentary series Off to War, which covered Arkansas Army National Guard soldiers, most of them from rural Clarksville, Arkansas, during their tour of duty in Operation: Iraqi Freedom.