Nick Drake's first two albums with Island Records, Five Leaves Left (1969) and Bryter Layter (1971), sold poorly. His reluctance to perform live or promote his work led Island to doubt he would record another album. By then, Drake was isolated in his London apartment, dealing with depression. In 1971, he saw a psychiatrist and was prescribed antidepressants, but he hesitated to take them, concerned about their interaction with the marijuana he used regularly.

While Pink Moon is often linked to Drake's depression, Cally Callomon, of Bryter Music, which manages his estate, disputes this: "Nick was incapable of writing and recording while he was suffering from periods of depression. He was not depressed during the writing or recording of Pink Moon and was immensely proud of the album."