The painting Lady Démon was made in Paul Klee's three-room apartment in Kistlerweg 6 in Berne where he had lived with his wife Lily Klee (née Stumpf) since January 1934. Klee used one room as a studio, and in good weather he worked on the balcony, which gave him a beautiful view of the mountains.

In October 1935, art dealer Will Grohmann informed Paul Klee that his book "Handzeichnungen 1921-1930" published at the end of 1934 had been confiscated. The art book was pulled from sale and pulped. In the same year, Klee noticed the first symptoms of his illness (diagnosed as progressive scleroderma), which would worsen in subsequent years. His output fell to 148 works in 1935 as a result of the disease.

Lady Démon was painted as work No. 115 in 1935. In it he returned to a motif from 1932, Hut Dame und Tischchen (Hat, lady and small table). At 150 x 100 cm, the painting is one of Klee's larger works. It is a typical example of the transition to Klee's late period, which began after 1936. It is characterised by the artist's returning to previous designs. The enlargement of the format and the retitling gave the works new substance. For Klee, the demonic was to be found in worlds between gods and demons, as well as in the clash of contrasts, such as in the elementary forces of desire and spirit striving to unite. The earthy hues give the painting a calm, almost gloomy appearance. This impression is reinforced by the choice of title.