Following the release of his previous album, Change We Must, in October 1994, Anderson took a break after touring with the rock band Yes before he started to write and record music for a new album. By 1995, Anderson had met his future wife Jane Luttenberger who became a significant inspiration to his life and the music he would write since the mid-1990s. A photograph of the couple is included on the album's liner notes.
Angels Embrace was recorded in 1995 with Anderson as producer, and mixed at Opio Studios in Pacific Palisades, Los Angeles. In a departure from his previous work, the album sees Anderson explore instrumental and ambient music. He had wanted to compose a "peaceful work" for some time, which he described that "plays quietly and embraces the whole room", and used several pieces of musical ideas that he had written and collected over the years as inspiration. Anderson named the album after a pastel painting by English artist Jack Shalatain titled "The Angels Embrace". His daughters Deborah and Jade provide additional vocals, and additional keyboards are performed by Steve Katz and Keith Heffner.
