Neon Telephone is the sixth track on Three O'Clock's first and only Paisley Park Records album Vermillion (their fourth and final album), and soon after the album's release, Neon Telephone was released as the album's second single (which also turned out to be the band's final single). Writing credit is given to Joey Coco, a pseudonym used on a few 1985-7 songs given to other artists (including You're My Love, Telepathy and Baby Go-Go).
Basic tracking took place on 10 July 1985 at the Washington Avenue Warehouse in Eden Prairie, Minnesota (the day after ♥ Or $). It was initially considered for use on Parade and/or Under The Cherry Moon but was instead saved for later use (it did, however, inspire the use of a neon telephone in Christopher Tracy's apartment in the movie Under The Cherry Moon).
It was sent to Three O'Clock for consideration along with Girl O' My Dreams, We Can Funk, Teacher, Teacher and Can't Stop This Feeling I Got, but the band decided to use only this track. Three O'Clock's vocal overdubs and instrumentation were recorded in 1987 - early 1988 at American Recording, Woodland Hills, California, retaining only Wendy Melvoin and Lisa Coleman's background vocals from the original recording.