Wham! had been a dominant force in the UK Singles Chart in 1984 and news that they were planning a Christmas single meant that a battle for the coveted Christmas #1 spot in the UK seemed set to be between Wham! and the year's other big act, Frankie Goes to Hollywood, who had achieved a third #1 in early December with "The Power of Love". The Band Aid project helmed by Bob Geldof, however, produced the #1 single. Wham!'s offering peaked at #2 for much of the period, although George's involvement in Band Aid meant that Wham! still had an input. Wham! subsequently topped the monies raised by Band Aid by donating all of their "Last Christmas/Everything She Wants" royalties to the Ethiopian famine appeal."Last Christmas" did make #1 in various other countries.

The single sold well over a million copies and became the biggest selling single in UK chart history not to reach #1. A year later, it was re-issued for Christmas again (this time without a billed flip-side) and got to #6. A second re-issue at Christmas 1986—by which time Wham! had split—stalled outside the top 40.

The song gradually sold in Japan, and finally became the best-selling single that did not reach that country's top-10 chart, selling more than 600,000 copies and peaking on the chart at #12 in 1992.

In Germany, the song is the most successful Christmas single of all time, having spent 94 weeks on the German Singles Chart and attained a peak position of No. 4. In January 2008, the song fell from No. 4 to No. 64 there, also making it the biggest fall out of the top ten on the singles chart.

Due to perceived similarities between "Last Christmas" and the song "Can't Smile Without You" as popularised by Barry Manilow, an out-of-court settlement was reached in which the first year's royalties were donated to the one-year-old "Band Aid" charity.