Although the lyrics are not exactly reconcilable with the historic details of the life and death of the famous Mexican revolutionary Pancho Villa, Van Zandt does not rule out the idea. In an interview, he recalled, "I realize that I wrote it, but it's hard to take credit for the writing, because it came from out of the blue. It came through me and it's a real nice song, and I think, uh, I've finally found out what it's about. I've always wondered what it's about. I kinda always knew it wasn't about Pancho Villa, and then somebody told me that Pancho Villa had a buddy whose name in Spanish meant 'Lefty.' But in the song, my song, Pancho gets hung. 'They only let him hang around out of kindness I suppose' and the real Pancho Villa was, uh, assassinated."
In the same interview, recalling an altercation with law enforcement, Van Zandt recalled, "We got stopped by these two policeman and...they said 'What do you do for a living?', and I said, 'Well, I'm a songwriter', and they both kind of looked around like 'pitiful, pitiful', and so on to that I added, 'I wrote that song Pancho and Lefty. You ever heard that song Pancho and Lefty? I wrote that', and they looked back around and they looked at each other and started grinning, and it turns out that their squad car, you know their partnership, it was two guys, it was an Anglo and a Hispanic, and it turns out, they're called Pancho and Lefty..so I think maybe that's what it's about, those two guys... I hope I never see them again"
lefty pulled the trigger.
They only let him hang around
Living on the road my friend,
Is gonna keep you free and clean
Now you wear your skin like iron,
Your breath as hard as kerosene.