When Herman Melville began working on what was to be his final novel, Billy Budd, Sailor: An Inside Narrative, his years of renown as a celebrated American author were well behind him. He had worked in the New York Customhouse for nearly two decades, until 1885, when he retired from his job and returned to his writing. Sometime between 1885 and 1891, Melville wrote a poem, "Billy in the Darbies," about a young sailor who had been executed for his involvement in a mutinous plot. In 1888, Melville read an article called 'The Mutiny on the Somers," which related the story of three sailors who in 1842 had been convicted of mutiny on board the U.S. brig Somers. Melville's older cousin had been one of the officers involved in the sailors' conviction, and his family knew details of the case that the public did not know. A split between what Melville biographer Leon Howard calls "the inside story and the historical record" - what really happened and what was reported - inspired Melville to expand his poem about Billy into a longer prose work with the subtitle "An Inside Narrative." However, Melville died in September 1891, six months after apparently finishing work on the book, and Billy Budd was left unpublished until 1924, when it was discovered among Melville's papers.

Raymond Weaver's 1921 publication of his Melville biography, Herman Melville: Mariner and Mystic, sparked a revival of interest in the works of the largely forgotten writer. In 1924, Weaver brought out The Collected Works of Melville, which includes the first edition of Billy Budd, and critics greeted the short novel enthusiastically, admiring its perceptiveness and its moral and symbolic complexity. Treating such weighty themes as duty and conscience, good and evil, justice, and guilt and innocence, Melville's final novel is considered one of his masterpieces.