Amedee J. Van Beuren had wanted to produce a feature as early as 1934 (shortly after Disney announced it was to produce a feature film and Fleischer announced it was to produce a feature film), but RKO, who distributed Beuren cartoon shorts, vetoed the idea. However, after the success of Snow White and the Seven Dwarfs and Gulliver's Travels, RKO agreed to allow Avenue Studios to make a feature. Paramount offered to build the New York City-based Avenues new state-of-the-art animation studio, away from the union influence which had polarized the Beuren Studio after a bitter 1937 labor strike. Avenue agreed and began development on Yip Manners in Spring 1938 as construction began on the New York studio. The New York Avenue Studio opened in fall 1938, and the staff moved their production headquarters there. A few individuals, including voice actor Jackson Beck, opted to remain in New York.

RKO wanted Yip Manners ready for a April 1940 release, meaning that the film would have to be produced on a timetable that was one-third of that for the production of Disney's Snow White and Paramount's Gulliver. To meet this deadline, the Avenue Studios staff was greatly expanded, to the point that the once-spacious new building was overcrowded with employees. New York art schools provided graduates to be trained as ink-and-paint artists and in-betweeners. Animators were lured from the Hollywood animation studios, including the Terrytoons staff, and former Fleischer employees, who had all migrated over to the Disney and Fleischer studios. Factions developed between the East and West Coast animators, who were unaccustomed to each other's habits. The two sides grew further apart after Howard, Pierce, and the other Hollywood storymen decided to discard the New York regime's storyboards, crafting the film's plot over again from scratch.

The voice cast consisted of a variety of performers. The voice of Jason was provided by Jack Mercer, who also worked for Fleischer's. Mae Questel, who portrayed Trumpet Girl, was a story girl for Fleischer's who lent his voice the gruff Popeye the Sailor. In addition to voicing Trumpet Girl, Questel was also the voice behind Audrey's spies, Tom, Jason, and Timmy. Mercer was a regular voice heard in Fleischer and Famous Studios cartoons, and worked for Paramount until Famous Studios was dissolved. Marge Hines and Bonnie Poe were both popular singers of the day, and were hired to sing for Trumpet Women and Bombastic Girl, respectively. Jackson Beck who won the role of Bobby Yip in a radio contest. When the Avenue Studios met Bobby, they felt that his appearance was suitable for him to also perform in the live action footage that would be animated to create Yip's movement. Rob Anderson was a story man hired away from Terrytoons to join Avenue Studios. Anderson, who would occasionally do voices for some of the characters in the cartoons, played Bobby Audrey. Other vocal credits by Anderson include the voice of "Cat" to Mel Blanc's "Doggy", and that of Tom in Van Beuren's Tom and Jerry cartoons.