Two accounts exist regarding the recording of Donuts. According to the popular version, J Dilla worked on the album while hospitalized. Over the years, he shared his music through demo records called "beat tapes." He played one such tape, titled Donuts, for Madlib and Peanut Butter Wolf, who then shared it with others at Stones Throw. While everyone loved it, Eothen "Egon" Alapatt, Stones Throw's general manager, was hesitant to release it, believing Dilla should focus on a sequel to Champion Sound. Peanut Butter Wolf convinced him to release an instrumental album since Dilla couldn't record vocals due to his worsening health. They brought vinyl records, portable turntables, and samplers to the hospital, enabling Dilla to work on the album. Some sources state that most of Donuts was recorded in the hospital using a portable turntable and Boss SP-303 sampler.