Following the 1991 breakup of the seminal trio Galaxie 500, drummer Damon Krukowski and bassist Naomi Yang planned to retire from music; stung by the group's bitter disintegration and left without a label due to the bankruptcy of Rough Trade, after issuing a lone 1991 EP under the name Pierre Etoile, the couple opted to concentrate on running Exact Change, the small surrealist publishing house they founded the year prior. Occasionally, however, they dragged their instruments out of mothballs and wrote songs; soon, producer Kramer, who earlier helmed all three of the Galaxie 500 records, contacted the duo about cutting new material for his label, Shimmy Disc. After repeatedly turning down the offer, Krukowski and Yang finally agreed, and traveled to Kramer's Noise New Jersey studios to begin recording.
Dropping the Pierre Etoile name to work as Damon & Naomi, they issued the LP More Sad Hits in 1991; featuring Krukowski on vocals, guitar, and percussion and Yang on vocals and bass, the record continued the ghostly ambience that defined the best work of their previous band while creating a more emotionally expansive backdrop. Following its release the couple again retired, but later turned up as the rhythm section of the Magic Hour, touring and recording three well-received albums in the mid-'90s. Krukowski and Yang resurfaced as a duo in 1995 with The Wondrous World of Damon & Naomi on Sub Pop; following the breakup of the Magic Hour, they returned in 1997 with the single "The Navigator” and a 1998 album, Playback Singers (also on Sub Pop).
The duo collaborated with the Japanese psych folk band Ghost for their 2000 album, appropriately dubbed Damon & Naomi with Ghost. Two years later, the CD/DVD Song to the Siren: Live in San Sebastian was released. Ghost guitarist Michio Kurihara featured on the album and remained a vital part of the duo’s live shows and recordings. After leaving Sub Pop and forming their own label, 20/20/20, they issued The Earth Is Blue in 2005 and Within These Walls in 2007. After a long break, which saw the release of a compilation of tracks culled from their Sub Pop recordings (The Sub Pop Years), the duo released its seventh studio album, False Beats and True Hearts, in early summer of 2011.