After completing a North American tour supporting one of their main influences, Yes, in summer 2004, Dream Theater took a two-month break. The band reconvened at The Hit Factory in New York City in November 2004 to begin work on their eighth studio album. The Hit Factory, a studio in which artists such as Michael Jackson, Madonna, Stevie Wonder, U2 and John Lennon had recorded, was earmarked for closure. Dream Theater was the last band to record there before it was permanently closed.

After writing the concept album Metropolis Pt. 2: Scenes from a Memory, the double album Six Degrees of Inner Turbulence and the metal-focused Train of Thought, the band decided to create "a classic Dream Theater album". Keyboardist Jordan Rudess described it as "really going back to creating a real band effort, as well as drawing upon all our various stylistic influences." On Octavarium, the band wanted to make the music less complex, featuring songs which Rudess regards as "quicker to appreciate", although noted that the twenty-four-minute "Octavarium" was not as accessible. Guitarist John Petrucci noted that they wanted to focus on writing strong songs. To achieve this, the band stripped the sound down to piano, guitar and vocals when writing, focusing on the melodies and song structures.

Drummer Mike Portnoy dismissed claims that Octavarium was an attempt to write a more commercial album, stating that the band simply "has that side to them. We love bands like U2 or Coldplay, as well as liking shorter songs as well." Portnoy noted that, after writing Six Degrees of Inner Turbulence and Train of Thought, they had not written an album of shorter songs for some time. He said that the band had found writing longer songs easier than writing shorter ones, and that the band was not trying to write a radio hit as "the label wouldn't have done crap with it anyway."

The band had previously written an orchestral-style piece in the form of "Overture" on Six Degrees of Inner Turbulence, but recorded it using keyboards. The tracks "The Answer Lies Within", "Sacrificed Sons" and "Octavarium" marked the first time Dream Theater worked with an orchestra, conducted by Jamshied Sharifi (who studied at Berklee College of Music at the same time as Portnoy, Petrucci and bassist John Myung). The orchestra was selected based on their sight reading ability, allowing all their parts to be recorded in a maximum of two takes, even though they had never seen or played the music before.