From Wikipedia: The lyrics describe a solitary narrator watching (or imagining) two lovers passing over a bridge, with the melancholic observer reflecting on the couple, the Thames, and Waterloo station. The song was rumoured to have been inspired by the romance between two British celebrities of the time, actors Terence Stamp and Julie Christie, stars of 1967's Far from the Madding Crowd. Ray Davies denied this in his autobiography and claimed in a 2008 interview, "It was a fantasy about my sister going off with her boyfriend to a new world and they were going to emigrate and go to another country." In a 2010 interview with Kinks biographer Nick Hasted, he said Terry was his nephew Terry Davies, "who he was perhaps closer to than his real brother in early adolescence." Despite its complex arrangement, the sessions for "Waterloo Sunset" lasted a mere ten hours; Dave Davies later commented on the recording: "We spent a lot of time trying to get a different guitar sound, to get a more unique feel for the record. In the end we used a tape-delay echo, but it sounded new because nobody had done it since the 1950s. I remember Steve Marriott of the Small Faces came up and asked me how we'd got that sound. We were almost trendy for a while." The single was one of the group's biggest UK successes, reaching number two on Melody Maker's chart, and went on to become one of their best-known.
"Waterloo Sunset" is one of the band's best known and most acclaimed songs in most territories, later being ranked number 42 on "Rolling Stone's 500 Greatest Songs of All Time". It is also their first single that is available in true stereo.