With the Young Americans sessions mostly concluded in late 1974, the material was delayed while Bowie extricated himself from his contract with manager Tony Defries. During this time he was staying in New York, and met John Lennon. The pair rocked out together, which led to a one-day session at Electric Lady Studios in January 1975. There, Bowie contacted several members of his tour band. First a cover of The Beatles’ "Across the Universe" , a Lennon song, was recorded. Then a new song called "Fame", inspired by a guitar riff by Carlos Alomar and with the title from Lennon, was then hurriedly developed by Bowie, Lennon and Alomar and recorded. Both tracks were then added to the Young Americans album. Lennon co-wrote it due to the lyrics (bemoaning the nature of celebrity) being inspired by conversations he had with Bowie on the subject, and because Bowie acknowledged that Lennon singing "Fame!" over Alomar’s guitar riff was the catalyst for the song. Lennon's vocals are also heard singing the repeated words "FAME, FAME, FAME" with his voice heard at a fast, normal, and slow playback speeds, until Bowie's vocal is heard singing the final lyrics of the song before the fade.

"Fame" became Bowie's biggest hit to that point in the U.S. It was his first number one hit on the Billboard Hot 100 chart, as well as his first to break the top 10, but would only reach number seventeen in the UK.

Bowie would later claim that he had "absolutely no idea" that the song would do so well as a single, saying "I wouldn't know how to pick a single if it hit me in the face.