Robbie Robertson wrote this song, which is set during the American Civil War - "Dixie" is a term indicating the old American South, which was defeated by the Union army. The song is not related to his heritage, as Robertson is half-Mohawk Indian, half-Jewish Canadian.
Robertson came up with the music for this song, and then got the idea for the lyrics when he thought about the saying "The South will rise again," which he heard the first time he visited the American South. This led him to research the Civil War.
The main character in the song, Virgil Caine, is fictional, but there really was a "Danville train" and "Stoneman's cavalry."
The train would have been part of the Richmond and Danville Railroad, a vital conduit for the Confederate Army. George Stoneman was a Union cavalry officer who led raids on the railroad.
The vocals featured the 3-part harmonies of Levon Helm, Richard Manuel, and Rick Danko on the choruses, and Helm sang the verses. He was the only band member who was from the South (Arkansas), so it was fitting that he played the role of Virgil Caine, a Virginia train worker, in this song.
Robbie Robertson is the song songwriter credited on this track. Speaking about Levon Helm's contribution, he told Goldmine in 1998: "Levon's connection to it was, things that when I went down there, things that he turned me on to. Just kind of showing me around and stuff, and bringin' me up to speed on what was goin' on in his 'hood.' And I don't know, really, where it had come from. Usually when you write songs, you write because it's the only thing you can think of at the time. But it was something that I absorbed, and then years later it came out in a song."
This was recorded in Sammy Davis Jr.'s house in Los Angeles. The Band rented it and converted a poolhouse into a studio to record their second album.
Joan Baez covered this in 1971. It was her biggest hit, reaching US #3 and UK #6.
Her version was recorded at Quad Studios in Nashville with producer Norman Putnam, who gathered about 20 people from around the studio to sing on the chorus. One of those voices belongs to Jimmy Buffett, who Putnam would later work with on his album Changes in Latitudes, Changes in Attitudes.
Asked about the Baez version of this song, Robbie Robertson said it was "a little happy-go-lucky for me," but he was thankful that it introduced many listeners to The Band.
Baez changed some of the lyrics on her version. For example, she sings, "Virgil Cain is my name and I drove on the Danville train. 'Til so much cavalry came and tore up the tracks again." The original lyrics are, "Virgil Cain is THE name and I SERVED on the Danville train. 'Til STONEMAN'S cavalry came and tore up the tracks again" referring to George Stoneman, who was a general in the Union army).