The group had important connections in the Australian and New Zealand rock scenes. Neil Finn and Paul Hester were former members of the New Zealand rock band Split Enz; Neil is the younger brother of Split Enz founding member Tim Finn. Nick Seymour is the younger brother of singer-songwriter-guitarist Mark Seymour, leader of the now defunct Australian rock group Hunters & Collectors.Neil Finn and Paul Hester decided to form a new band during the Split Enz farewell tour Enz with a Bang. Nick Seymour approached Finn during the after party for the Melbourne show and asked if he could try out for this new band. The first incarnation of the band, The Mullanes, formed in Melbourne in 1985 and also included guitarist Craig Hooper, formerly of The Reels. They secured a record contract with Capitol Records and moved to Los Angeles, at which time Hooper left the band. At the label's behest, the band changed its name to "Crowded House," which alluded to the cramped quarters the three members shared at an apartment in North Sycamore Street in West Hollywood during the recording of the album. They also invited former Split Enz keyboard player Eddie Rayner to join, and he produced the track "Can't Carry On" for the debut self-titled album. He initially joined them on tour in 1988 on keyboards, but had to leave for family reasons before he could be made a full member. Crowded House was later nicknamed The Crowdies by their Australian fans.


After the Temple of Low Men Canadian tour, the group decided to take a break and Neil began writing some songs with his brother Tim Finn for an album they were considering to release under the name Finn. The sessions yielded enough songs for an album and both brothers were happy with the result, but Neil was also faced with the task of writing a third Crowded House album. After recording with Seymour and Hester, the record company rejected most of the songs recorded for this album, Neil asked his brother if they could use some of the Finn songs for the next album. Tim agreed on the proviso that he be made a member, though in some interviews, he indicated that this was meant as a joke. Neil took this literally and the group with Tim as a newly appointed member, returned to the studio.
These recording sessions were combined with songs from the earlier sessions that yielded Woodface. The album was released in July 1991 and featured seven songs written by Tim and Neil Finn. Most of the songs written jointly featured the brothers performing harmonised vocals except the sombre "All I Ask". This song was performed solo by Tim and was later featured on AIDS awareness commercials in Australia. The other tracks were primarily Neil's compositions, with the exception of the exuberant Hester-written song "Italian Plastic", which became a crowd favorite at live concerts. "Chocolate Cake" was released as the first single, and it sealed the fate of the band in America. The song was a humorous comment on American excesses. It was not taken well by critics or the public in the country and failed to achieve a position on the United States' Billboard 200 singles chart. The album's second single, "Fall at Your Feet" proved more successful in the U.S., but it still only reached #75.
