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Barish and Monash first offered the project to Carpenter in July 1985. He had read the Goldman/Weinstein script and deemed it “outrageously unreadable though it had many interesting elements”. To compete with rival production The Golden Child’s casting of box office draw Eddie Murphy, Carpenter wanted a big star of his own and both Clint Eastwood and Jack Nicholson were considered but were busy. The studio wanted to cast Kurt Russell because they felt that he was an up-and-coming star. Initially, Russell was not interested in the screenplay and the character of Jack Burton because he felt that there were “a number of different ways to approach Jack, but I didn’t know if there was a way that would be interesting enough for this movie”. After talking to Carpenter and reading the script a couple more times, he gained insight into the character and liked the notion of playing “a hero who has so many faults. Jack is and isn’t the hero. He falls on his ass as much as he comes through. This guy is a real blowhard. He’s a lot of hot air, very self-assured, a screw-up”. Furthermore, the actor felt that "at heart he thinks he's Indiana Jones but the circumstances are always too much for him". Russell felt that the film would be a hard one to market. "This is a difficult picture to sell because it's hard to explain. It's a mixture of the real history of Chinatown in San Francisco blended with Chinese legend and lore. It's bizarre stuff. There are only a handful of non-Asian actors in the cast".

John Carpenter had seen Dennis Dun in Year of the Dragon and liked his work in that film. He met the actor twice before casting him in the role of Wang Chi only a few days before principal photography. The martial arts sequences were not hard for Dun who had “dabbled” in training as a kid and done Chinese opera as an adult. He was drawn to the portrayal of Asian characters in the movie as he said, “I’m seeing Chinese actors getting to do stuff that American movies usually don’t let them do. I’ve never seen this type of role for an Asian in an American film”.

The studio pressured Carpenter to cast a rock star in the role of Gracie Law, Jack Burton's love interest and constant source of aggravation. For Carpenter there was no question, he wanted Kim Cattrall. The studio was not keen on the idea because at the time Cattrall was primarily known for raunchy comedies like Porky's and Police Academy. She was drawn to the movie because of the way her character was portrayed. “I’m not screaming for help the whole time. I think the humor comes out of the situations and my relationship with Jack Burton. I’m the brains and he’s the brawn”.