In 1969, Jimi Hendrix's half-brother Leon Hendrix was suffering from drug addiction and other problems.^[2] After Leon approached his successful half-brother Jimi and asked him for money, Hendrix wrote "It's Too Bad".^[3] On Tuesday, February 11, 1969,^[4] Hendrix was at Record Plant Studios in New York City producing the song "I Can See" for his friends in the Buddy Miles Express band at a recording session that went from 12:00 am to 4:00 am.^[5] With musician Buddy Miles on drums and Duane Hitchings on organ,^[5][6][7] the Buddy Miles Express band recorded "I Can See" (later retitled "Destructive Love") as Hendrix operated the mixing console.^[5] After the song was recorded, Hendrix came from behind the control room console to play guitar for two impromptu originals, "World Traveler", a guitar-and-organ duel between Hendrix and Hitchings, and "It's Too Bad".^[5] Both songs were recorded in one take.^[5] Hitchings remarked about his experience in recording with Hendrix, noting in 2010: "Jamming with him was an amazing experience. I was scared to death!".^[7]

In the 1969 song track, Hendrix plays the role of both himself and his brother Leon.^[3] Backed by modern day blues, the song begins with "It's too bad, Lord, my brother can't be here today", to explore Hendrix's uneasy relationship with Leon,^[6] a theme that Hendrix also explored in his 1969 song, "Shame, Shame, Shame".^[8] In "It's Too Bad", the song notes how Hendrix sent Leon "a-crying away",^[6] and goes on to addresses Hendrix's uneasy relationship with other African-Americans, noting: "So I'll go way across the tracks ... And man they treat me the same way as you do ... [They] say man until you come back, completely black, go back where you came from too".^[6] Music reviews attributed the uneasy community connection expressed in the song to 1960s-1970s African-Americans' objection to Hendrix's "colorblind vision" by accusing Hendrix of "achieving stardom by pandering to rock's largely white audience".^[6][9] The song also makes reference to Hendrix's 1968 song "Room Full of Mirrors", which refers to a cracked mirror metaphor Hendrix used to convey the many sides of his emotions.^[10]

After Hendrix died without a will in 1970, his father Al received the rights to Hendrix's estate, including "It's Too Bad".^[11] A little more than thirty years after the song was recorded, it was one of four Hendrix songs newly discovered and added to The Jimi Hendrix Experience, a four-disc box set.^[12] In reviewing the song on The Jimi Hendrix Experience (2000), producer and audio engineer Eddie Kramer noted about the tune:^[3] "I think it's very clever, and very, very emotionally charged. It has a tremendous wallop".^[3] Two years later, Hendrix's father died and Leon sued their father's estate and Hendrix's stepsister Janie to gain control over about one-quarter of US$80 million.^[11] After Washington Superior Court judge Jeffrey M. Ramsdell limited Leon's claim to a single gold record left to him when his father died in 2002, Janie remarked in 2004 about the lawsuit: "Jimi wrote a song about Leon and it was called, 'It's Too Bad'. The lyrics to that song are what this is all about".^[11]

• Lyrics of "It's Too Bad" at Jimi Hendrix; Janie Hendrix (2003), Jimi Hendrix: The Lyrics, Hal Leonard Corporation, p. 83, ISBN 0634049305, retrieved January 26, 2013
• Sheet music first page for "It's Too Bad" at "It's Too Bad by J. Hendrix - sheet music on MusicaNeo", MusicaNeo Sheet Music, MusicaNeo, 2013, retrieved January 26, 2013