Following the release of her 2001 album, Little Sparrow, Dolly continued to write. While writing songs at her Tennessee Mountain Home, she said the songs were pouring out of her by the dozens. A representative from Sugar Hill Records confirmed in late January 2002 that Dolly was "writing and arranging" songs for a new album, but recording had not begun so it was unclear when the album might be released. It was confirmed in February 2002 by Dollymania that Dolly had begun recording the album and that it should be released in summer 2002. Eager to begin recording the songs she had written, Dolly booked a session in Knoxville, initially as a demo session. "I didn't intend to produce a record," she said. "I was just producing these song demos. But it started sounding so good that I was getting really excited." Dolly further described the recording process by saying, "I decided I wanted to use everybody from 'up home,' or at least fresh people. There was nothing heavy or hard about it. I just went in with the pickers and we all kicked ideas around. That's how you produce great records anyway—let talented people do what they do. It's fairly 'live,' because I'm not the kind of singer who can start and stop and go back and get the same feeling. I just had a big time doing this."

?Recording for the album began in February 2002 at Southern Sound Studios in Knoxville, Tennessee.

Twelve of the album's fourteen tracks are Parton-penned originals. In addition to these twelve songs, the album features two covers: Led Zeppelin's "Stairway to Heaven" and Bread's "If". The album also includes new versions of two songs Dolly had previously recorded. She first recorded "Shattered Image" for her 1976 album, All I Can Do. "What a Heartache" had originally been recorded in 1984 for the Rhinestone soundtrack album. Dolly would record this song for a second time in 1991 for her Eagle When She Flies album. When asked why she would choose to re-record songs she has done before, Dolly said, "I have very strong feelings about them. They've never really had a chance to be all that they can be. I have hundreds of new songs, but there are some that 'want to be done' until I find the right way." Dolly later re-recorded "These Old Bones" for the 2007 UK compialtion album, Singer, Songwriter & Legendary Performer.

The album opens with "Halos and Horns". Dolly said she originally came up with the title about two years earlier when she was pitching a pilot to Fox that never got picked up. After she completed writing the song, Dolly said she "thought it would make a good album title because it sets up the whole album being about sinners and saints." Dolly said she was inspired to write the album's second track, "Sugar Hill", because "Every time I'd look at my record company's label, I'd think, 'Sugar Hill, now that's a really pretty name.' I wondered if there was a place called Sugar Hill and found out there were several. The one I courted on wasn't called Sugar Hill, but it got pretty sweet when I was up on it." The third track, "Not for Me", is a song that she wrote at least 35 years prior, but had never recorded. Dolly said she found it on a tape while looking for an old song she wanted to use in the museum at Dollywood. She described that original demo by saying, "I thought it was a beautiful melody and I was picking the guitar before I had fingernails and I remembered that I used to play really good. I don't even remember when I wrote it. It was just a vague memory, but it must have been a time when I was feeling sad. It had to have been right when I first came to Nashville [in 1964], because there were other songs on that tape that were written before I even left home." The album's fourth track, "Hello God", was written the day after the September 11 attacks. Speaking about the track, Dolly said, "I realized just how fragile we really are, and how small life is, and how everything can change in the blink of an eye. I hope everything comes across as I meant it. It's like everybody believes that God is their God. But God belongs to everybody." The fifth track is a cover of "If", which was originally recorded by Bread. Dolly said she had always loved the song and wanted to record it, but wanted to do it totally different from the original arrangement. When asked why she chose to re-record the album's sixth track, "Shattered Image", Dolly responded, "The reason I decided to re-do it is because of all the shit that comes out in the tabloids. It's like they punish you to death. They tell some God-awful things. Why can't people just leave you alone to live your life as you see fit? So that is why I wanted to drag this song back out, because I was feeling like that." The seventh track, "These Old Bones", tells the story of a clairvoyant mountain woman and her long-lost daughter. Speaking of her inspiration for the song, Dolly said, "I was up at the Tennessee Mountain Home, writing. I was making up breakfast and thinking about this title that had come to me in a dream the night before. Then later I started making up a 'mountain' story about some old crazy woman who was psychic. 'Cause we have those "up home" all the time."

The album's eighth track, "What a Heartache", is a song that Dolly had previously recorded twice. She said she chose to re-record it again because "I love the song too much to just let it lie there. Something in me says that somebody is going to have a big hit record on this someday." "I'm Gone", the ninth track, is a "kiss off " song. Dolly said that it is loosely based on a couple that he knew who were also relatives of hers. Dolly said she wrote the tenth track, "Raven Dove", at 2 o'clock in the morning. She said she was awakened by a force and felt a little inner voice tell her to get up because she had to do something. She got up went to the kitchen and sat down and wrote the line "Raven of darkness, dove of peace." After that, the rest of the song came out effortlessly. Dolly said the eleventh track, "Dagger Through the Heart", is one of her favorites on the album. She said she had written another song with this title, but felt it was mediocre so she re-wrote it. She went on to say she was "real proud" of how this version turned out. The album's twelfth track, "If Only", was written for a film about Mae West that Dolly was working on at the time, but the song was cut from the film because the producers didn't want her singing a song this sad. The thirteenth track, "John Daniel", is another song that Dolly wrote 30 to 35 years earlier. She said, "I've always loved the song, and I knew I wanted to use the Kingdom Heirs quartet on the album. I was thinking of songs I've written that I haven't recorded, and "John Daniel" came to mind." The album closes with a cover of the Led Zeppelin hit, "Stairway to Heaven". Speaking about her recording, Dolly said, "I knew I was walking on sacred ground because it is a classic...I was scared to death to send it to Robert Plant and Jimmy Page. They sent word back that it was fine and they loved it. In fact, Robert Plant said he'd always thought of it as a spiritual song, and he was thrilled we'd used a choir on it, because he thought about that, too. If they like it, that's most important to me. But I do hope the public will accept it too. I even hope they love it."

The album was announced by Dolly on April 6, 2002, during a press conference at the opening of Dollywood's sixteenth season. She also announced she had written songs titled "Halos and Horns" and "Hello God" for the album, which would also feature a bluegrass cover of Led Zeppelin's "Stairway to Heaven" and Bread's "If". She also announced plans for a summer tour. The album's track listing was revealed on April 17.

To promote the album, Sugar Hill Records began posting on their website a short clip of a track from the album each week leading up to its release, starting with "Halos and Horns" on May 13. This was followed by "I'm Gone" on May 20, "Shattered Image" on May 29, "John Daniel" on June 2, "Not for Me" on June 10, "If Only" on June 24, and "Stairway to Heaven" on July 8. In addition to these clips, the Minneapolis-St. Paul Star Tribune previewed four songs on their website. The four songs were "Stairway to Heaven", "Not for Me", "Hello God", and "Raven Dove".

?The album was released July 9, 2002, on CD and cassette. It was reissued digitally by Dolly Records on April 10, 2020.

?Dolly appeared on NBC's Today on July 5 to promote the album. She performed "I'm Gone", "9 to 5", and "Halos and Horns". The day of the album's release she appeared on The View, performing "Halos and Horns" in addition to being interviewed. That evening, she made an appearance on The Late Show with David Letterman where she was interviewed and performed "Dagger Through the Heart". On November 6, Dolly performed "Hello God" on the 36th Annual Country Music Association Awards.

?Dolly embarked on her first tour in 10 years in support of the album. The sold-out Halos & Horns Tour played 25 shows throughout the United States and the United Kingdom. The December 12 and 13, 2002 performances at Dollywood's Celebrity Theater were recorded for a planned television special that never materialized, eventually being released on DVD and CD in 2004 as Live and Well?.

?The album was nominated for the Best Country Album at the 45th Annual Grammy Awards in 2003, while "Dagger Through the Heart" was nominated for Best Female Country Vocal Performance. "I'm Gone" was nominated for Best Female Country Vocal Performance at the 46th Annual Grammy Awards in 2004. "Hello God" won Single of the Year at the International Country Gospel Music Association in 2003.

Personnel

Steve Turner – drums, snare drum, washboard, tambourine, bones
Terry Eldredge – bass fiddle, doghouse bass, background vocals, harmony vocals
Gary Davis – acoustic guitar, banjo, Applejack banjo
Robert Hale – acoustic guitar
Randy Kohrs – dobro, Wabash guitar, Weissenborn guitar, background vocals, harmony vocals
Kent Wells – acoustic guitar, electric guitar, baritone guitar
Richard Dennison – piano, background vocals, harmony vocals
David Sutton – harmonica, background vocals, harmony vocals
Jimmy Mattingly – fiddle, mandolin, viola
Eric Bennett – background vocals, harmony vocals
Steven French – background vocals, harmony vocals
Vicki Hampton – harmony vocals
The Kingdom Heirs – background vocals, harmony vocals
Jennifer O'Brien – harmony vocals
?Dolly Parton – lead vocals, harmony vocals, old mountain woman vocals
Arthur Rice – background vocals, harmony vocals
April Stevens – harmony vocals
Beth Stevens – harmony vocals
Darrell Webb – mandolin, harmony vocals
Bob Carlin – clawhammer banjo
Brent Truitt – mandolin

Production
The Blueniques – production assistant
Gary Davis, Richard Dennison, Terry Eldredge, Randy Kohrs, Jimmy Mattingly, Brent Truitt, Steve Turner, Kent Wells
Danny Brown – engineer, mixing
Gary Davis – production assistant, mixing assistant
Richard Dennison – vocal supervisor, mixing assistant?
Scottie Hoaglan – second engineer
Dolly Parton – producer
Phil Van Peborgh – their engineer
Seva – mastering

Other personnel
Don Bailey – design
Robert Behar – wardrobe
Bambi Breakstone – wardrobe
Candy Burton – makeup
Chris Ferrera – design
Jerry Joyner – design
Annie Leibovitz – photography
Pat Murphy-Racey – band photography
Cheryl Riddle – hair
Rose Sanico – wardrobe
Virginia Team – additional photography, art director