Cocteau Twins released their fifth album, Blue Bell Knoll, in 1988. Despite signing with Capitol Records, the band chose not to promote the album extensively, although they did shoot a video for the single "Carolyn's Fingers," released only in the US. The album was not supported by a tour. They hired a manager for the first time due to previous tax troubles, but tensions arose with 4AD president Watts-Russell, who reportedly disapproved of the new manager.

During this period, bassist Simon Raymonde married his first wife, Karen, and vocalist Elizabeth Fraser was expecting her first child with guitarist Robin Guthrie. Guthrie's cocaine use escalated during the recording of Blue Bell Knoll, leading Fraser and Raymonde to hope that the new baby would distract him from his dependency. However, this did not happen, and Guthrie's drug reliance continued, straining his relationship with Fraser.

Their child, Lucy Belle, was born in September 1989, and Heaven or Las Vegas was released on her first birthday. Fraser noted that her pregnancy gave her newfound confidence, though she later felt it wane after giving birth. Raymonde's father, Ivor, passed away shortly after Lucy's birth, which he felt influenced the emotional depth of the album.