According to Mark, inspiration for the song came from witnessing a jazz band playing in the corner of a practically deserted pub in Deptford, South London. At the end of their performance, the lead singer announced that they were the "Sultans of Swing", and Knopfler found the contrast between the group's dowdy appearance and surroundings and their grandiose name amusing.

Folk singer and Columbia recording artist Bill Wilson (1947–1993) claimed to have co-written the song. Wilson did not get a songwriting credit on the release,but claimed to have received some monetary compensation for his input.

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