The song was one of several introduced in the film The Fleet's In (1942). It was sung in the film by Dorothy Lamour (with harmony by Bob Eberly and Helen O'Connell and featuring the Jimmy Dorsey Orchestra) and is one of the songs most associated with the singer/actress. Schertzinger, who co-wrote all the film's songs with Mercer, was also the director of the movie.
According to the TCM documentary Johnny Mercer: The Dream's On Me, Mercer wrote the song for Judy Garland, to express his strong infatuation with her. He gave it to her the day after she married David Rose.
English singer Frank Ifield recorded the song in a yodeling country-music style on 27 May 1962, and his version went to number one on the UK Singles Chart selling 1.1 million copies in the UK alone. The recording stayed at No.1 for seven weeks. It also reached number five on the U.S. Billboard Hot 100 and number one on the U.S. Easy Listening chart. American country singer Slim Whitman, known for his yodeling, later recorded the song in a similar fashion. The song is now something of a country standard as well as a jazz standard.
In 2010, Australian entertainer Nicki Gillis worked with Frank Ifield and Ifield's long-time music director, Bob Howe, to record a duet version of the song that included the original first verse that was not recorded in the 1962 version. The accompanying video clip included old footage of Ifield and new footage of Gillis and Ifield working with Howe.