Songfacts®:

• A little-known song on an often (and many feel unfairly) overlooked album, Dylan's "Under The Red Sky" marks the first time Dylan was ever recorded playing accordion for a studio production. It also features George Harrison on slide guitar and Al Kooper on Hammond organ, and instrument he famously played on Dylan's "Like a Rolling Stone."
• "Under The Red Sky" is a sing-song fairy tale about a little boy and a little girl who "lived in an alley under a red sky." That "red sky" portion was identified by some critics at the time of the album's release as an environmentalist statement, but Dylan squashed that, saying, "It's about people who got trapped in [my] hometown."
  
  Though he was born in Duluth, Dylan's likely referring to Hibbing, Minnesota, which is where he grew up from age six onward.
• The song hides some Biblical references that become pretty obvious once identified. Matthew 16:1–3 reads:
  
  "The Pharisees and Sadducees came up, and testing Jesus, they asked Him to show them a sign from heaven. But He replied to them: 'When it is evening, you say, 'It will be fair weather, for the sky is red.' And in the morning, 'There will be a storm today, for the sky is red and threatening.' Do you know how to discern the appearance of the sky, but cannot discern the signs of the time?'"
  
  Taking the Biblical reference in hand, "Under The Red Sky" may be about a couple living through the last stages of the End Times. If true, this lends an interesting interpretation to the lyric, "Some day little girl, everything for you is gonna be new."
  
  In typical Dylan fashion, though, we are quickly brought back down to Earth with, "Some day little girl, you'll have a diamond as big as your shoe."
  
  It's generally best with Dylan not to read much into his allusions, which are usually artistic devices to add layers of meaning more than they are literal statements.
• Continuing the apparent Biblical theme, the lyric, "This is the blind horse that leads you around" may hark to Zechariah 12:4, which reads, "'On that day I will strike every horse with panic and its rider with madness,' declares the Lord. 'I will keep a watchful eye over Judah, but I will blind all the horses of the nations.'"
  
  Interestingly, Dylan delivers this lyric right after saying, "This is the key to the kingdom, and this is the town," seemingly contrasting the way to Heaven against the Dylan's hometown.
• "Under The Red Sky" is an intriguing song, but was largely swept under the wave of disinterest that followed Under The Red Sky. As with much of Dylan's work from the '80s through the '90s, old fans were disappointed, critics were resentful, and new fans just didn't care.
  
  Writing for Q in 1990, Charles Shaar Murray summarized the general reception of the album when he wrote, "In the era of Classic Rock and Old-Is-Beautiful, it's more than tempting to give our old heroes the benefit of the doubt, but Dylan deserves better, and so do we. 'New Dylans' have come and gone, and the best of them – Springsteen, Costello – have discovered their own identities in the process, but the achievements of the old one remain unchallenged not only by others, but also, sadly enough, by his own current incarnation."
• Don Was played bass on this one. He also produced the album along with David Was and "Jack Frost," a pseudonym for Dylan.
• Don Was recalls one incident while they were recording Harrison's guitar solo. Before Harrison had a chance to tune his guitar, Dylan hit "record" and told him to play. Harrison did as told and went through the solo. Dylan said the solo was perfect and they were done.
  
  Harrison, not believing it could have actually been that good, asked Was his opinion. Was suggested they try it again, and a relieved Harrison laid down the version heard in the final song.