As per director
R. Sundarrajan,
Varalaru's original base story was scripted by him for
Kamal Haasan under the
Sivaji Productions banner. This did not happen, however, due to Haasan's unwillingness to work with Sundarrajan as he did not like the script. He felt it would portray him as a womaniser. In late 1999, K. S. Ravikumar narrated two scripts to Kamal Haasan. One was about a transgender incorporating three roles titled
Madana and a comedy script
Thenali. Haasan was impressed with both but turned the former offer down due to his conflicting schedule at the time.
Rajinikanth had agreed to do the story titled
Madana if Kamal opts out. Ravikumar was forced to pull out of a project titled
Jaggubhai which he had written and begun directing and consequently signed on
Ajith Kumar, who had just opted out of
A. R. Murugadoss's action film,
Mirattal. Later, the project shifted to the hands of NIC Arts (from Sri Surya Movies) due to a higher budget. The filming of
Godfather began by November 2004.
Asin was added to the film after
Jyothika walked out of the project, while
A. R. Rahman was signed on as music composer to the film to be produced by
S. S. Chakravarthy. Early reports suggested that one of Ajith's roles in the film would be an
eunuch or a
transgender, but his role turned out to be that of an effeminate classical dancer. In January 2005, it was announced that the film was put on hold due to financial problems, initiating a long delay in the production of the film. The film also faced problems, after the government banned scenes involving excessive smoking in films. Furthermore, in mid-2005, Ajith fell out with the producer, who had made several films with him in the past and stated that the pair would never work together again. This led to Ajith taking a forced sabbatical, with his market being at a low following the failure of his previous film
Ji. Chakravarthy avoided trouble by claiming he would finish the film by 15 June 2005 and signed a contract in March with the Tamil Nadu Producers Committee, who wanted to resolve the problem. The film restarted in April 2005, with a 10-day shoot in Ooty including a song, with Ravikumar revealing that further shots would be filmed in
Hyderabad, and then in Canada, and that the film would be ready for release by 22 July 2005.
P. C. Sreeram opted out of the film after his dates clashed with his work in
Kanda Naal Mudhal and was replaced by Priyan. Actress
Meena, who was supposed to do play Gayatri, also opted out due a conflicting schedule.
Devayani was also considered for the role but she refused as she did not want to scold Ajith and after unfruitful discussion with
Simran, Kanika was signed. Problems arose in mid-2005, when Asin could not allot dates for the film due to her work in
Ghajini,
Majaa and
Sivakasi. However, by 15 June, thirty five days' work was still required and Ajith was forced to leave the project to begin work on
Bala's
Naan Kadavul as per the signed contract. Chakravarthy later reported Ajith for the delays and before further problems occurred, L. Suresh of Ananda Pictures, a leading Chennai based distributor, intervened and solved the existing problems by providing an interest-free loan. Subsequently, the film became trouble free but took more than a year to finish the remaining portions and only released in October 2006 as Ajith took priority in completing
Paramasivan and
Thirupathi, both also released in 2006. Meanwhile, the title
Godfather was reverted to
Varalaru (History) after the state government gave an order to grant entertainment tax exemption to movies titled in Tamil. ==Music==