McCartney recorded the song entirely on his own during the sessions for his solo project McCartney II. Although the members of Wings are not on the recording, they do appear in the promotional music video.

Fellow ex-Beatles John Lennon and George Harrison had already released festive singles, and Ringo Starr made a Christmas album in 1999. Of all of the former Beatle seasonal offerings, Lennon's "Happy Xmas (War is Over)" and McCartney's "Wonderful Christmastime" have become two of a canon of Christmas songs played year after year.

Following its release as a stand-alone single in the United Kingdom, "Wonderful Christmastime" peaked at No. 6 on the United Kingdom Singles Chart on the week ending 5 January 1980. Although the song did not chart on the Billboard Hot 100 singles chart in the United States, it did chart for two weeks on Billboard's specially designated Christmas Singles chart in December 1984, peaking at No. 10. It also reached No. 29 on Billboard's weekly Hot Adult Contemporary Tracks chart in early January 1996.

The song continues to receive substantial airplay every year. Including royalties from cover versions, it is estimated that Paul McCartney makes $400,000 per year from this song, which puts its cumulative earnings for this song at near $15 million.