John Russell Taylor's official biography of Hitchcock, Hitch: The Life and Times of Alfred Hitchcock (1978), suggests that the story originated after a spell of writer's block during the scripting of another film project:
Alfred Hitchcock had agreed to do a film for MGM, and they had chosen an adaptation of the novel The Wreck of the Mary Deare by Hammond Innes. Composer Bernard Herrmann had recommended that Hitchcock work with his friend Ernest Lehman. After a couple of weeks, Lehman offered to quit saying he didn't know what to do with the story. Hitchcock told him they got along great together and they would just write something else. Lehman said that he wanted to make the ultimate Hitchcock film. Hitchcock thought for a moment then said he had always wanted to do a chase across Mount Rushmore.
Lehman and Hitchcock spitballed more ideas: a murder at the United Nations Headquarters; a murder at a car plant in Detroit; a final showdown in Alaska. Eventually they settled on the U.N. murder for the opening and the chase across Mount Rushmore for the climax.
For the central idea, Hitchcock remembered something an American journalist had told him about spies creating a fake agent as a decoy. Perhaps their hero could be mistaken for this fictitious agent and end up on the run. They bought the idea from the journalist for $10,000.
Lehman would sometimes repeat this story himself, as in the documentary Destination Hitchcock that accompanied the 2001 DVD release of the film. In his 2000 book Which Lie Did I Tell?, screenwriter William Goldman, commenting on the film, insists that it was Lehman who created North by Northwest and that many of Hitchcock's ideas were not used. Hitchcock had the idea of the hero being stranded in the middle of nowhere, but suggested the villains try to kill him with a tornado. Lehman responded, "but they're trying to kill him. How are they going to work up a cyclone?" Then, as he told an interviewer; "I just can't tell you who said what to whom, but somewhere during that afternoon, the cyclone in the sky became the crop-duster plane."
In fact, Hitchcock had been working on the story for nearly nine years prior to meeting Lehman. The "American journalist" who had the idea that influenced the director was Otis C. Guernsey, a respected reporter who was inspired by a true story during World War II when British intelligence created a fictitious agent and watched as the Germans wasted time following him around. Guernsey turned his idea into a story about an American traveling salesman who travels to the Middle East and is mistaken for a fictitious agent, becoming "saddled with a romantic and dangerous identity." Guernsey admitted that his treatment was full of "corn" and "lacking logic." He urged Hitchcock to do what he liked with the story. Hitchcock bought the sixty pages for $10,000.
Hitchcock often told journalists of an idea he had about Cary Grant hiding out from the villains inside Abraham Lincoln's nose and being given away when he sneezes. He speculated that the film could be called "The Man in Lincoln's Nose" (Lehman's version is that it was "The Man on Lincoln's Nose") or even "The Man who Sneezed in Lincoln's Nose," though he probably felt the latter was insulting to his adopted America. Hitchcock sat on the idea, waiting for the right screenwriter to develop it. At one stage "The Man in Lincoln's Nose" was touted as a collaboration with John Michael Hayes. When Lehman came on board, the traveling salesman—which had previously been suited to James Stewart—was adapted to a Madison Avenue advertising executive, a position which Lehman had formerly held. In an interview in the book Screenwriters on Screenwriting (1995), Lehman stated that he had already written much of the screenplay before coming up with critical elements of the climax.