Much of the movie, including the music store battle and the scenes with the villains marching triumphantly down a street, was filmed in Whittier, California.
After the credits, Skeletor's head pops up from the lake and says, "I'll be back!" which sets the stage for a sequel that was never made. However, a script for a "Masters of the Universe" sequel was written, only to be re-written and become the script for the Jean-Claude Van Damme movie Cyborg (1989).
The original idea was to have the film set on Eternia throughout and be much more faithful to the cartoon, but due to budgetary reasons the script was changed to have it set on earth and reduce the amount of sets, and strange characters they would need to create.
'Sarah Douglas (I)' was initially approached to play the part of Evil-Lyn, in an attempt to cash in on her success of playing wicked, evil villainesses in Superman (1978), Superman II (1980) and Conan the Destroyer (1984), but the interest came to nothing and ultimately Meg Foster played the part.
Due to financial difficulties, Cannon Cinema made a decision to discontinue all filming 3 days before its scheduled end, leaving the movie in a quandary. All the climactic scenes were completed bar the final battle and resolution between He-Man and Skeletor. After 2 months, the Cannon Cinema executives allowed director 'Gary Goddard' to film the ending in a complete, albeit rushed manner.
Mattel, the toy company that produced the original He-Man toys, ran a contest where the winner would get a role in the new He-Man movie. But since the movie was already under the gun to be finished in time and over budget, director 'Gary Goddard' had to squeeze in the contest winner into the shoot. The winner, Richard Szponder, is featured as "Pigboy" who hands Skeletor his staff when he returns from Earth.
The original budget of $17 million increased to $22 million and this became Cannon Films' most expensive film.
With 'Gary Goddard' , Dolph Lundgren worked some changes from the original script -- adding more action sequences, strengthening the role of He-Man and working on the choreography of the battle scenes.