It was recorded in Paris at the Daft House Production studio, where Bangalter was based at the time. The song was conceived at the Rex Club in Paris, where the trio was playing a live set. Both Bangalter and Braxe made the melodies, while Diamond sang vocals. The next day the Chaka Khan sample was added in the studio.
"Music Sounds Better With You" was licensed by Virgin records, alongside another Thomas Bangalter co-production, Bob Sinclair's "Gym Tonic". Both songs were massive hits of the summer and Virgin offered Bangalter 3 million dollars to produce a full Stardust LP, but Bangalter declined and he, Braxe and Diamond have not worked together since. Diamond and Braxe resumed their ongoing solo careers, and Bangalter, along with his partner Guy-Manuel, released their second studio album Discovery.