Although the film takes place in Chicago and (briefly) Tokyo, it was filmed in Bulgaria, for economic reasons. The location of filming caused issues with the predominantly English speaking cast and crew, who couldn't speak Bulgarian, resulting in the need for several translators on set.
Is the first film in either The Grudge or Ju-on franchises to take place in chronological order. A staple of the series was that each film would employ non-linear storytelling, until this film.
The cast were not allowed to see Aiko Horiuchi in person or getting dressed in the costume and makeup, so that when they were to film scenes where she's attacking them the actors' reactions would be authentic. Marina Sirtis, Shawnee Smith, and Johanna Braddy in particular recount being genuinely terrified when first filming with Horiuchi as Kayako.
The only film in the series that does not feature Toshio's pet cat, as the budget would not allow a cat to be used for the production (his meow can still be heard from Toshio's mouth however).
Takako Fuji had passed on the role of Kayako Saeki because she had grown tired of playing the role for about a decade of film productions. She was recast with Aiko Horiuchi in her feature film debut in a credited role.