Hendrix had been recording with Cox since April and jamming with Miles since September, and the trio wrote and rehearsed material which they performed at a series of four shows over two nights on December 31 and January 1, at the Fillmore East. They used recordings of these concerts to assemble the LP, which was produced by Hendrix. The album includes the track "Machine Gun", which musicologist Andy Aledort described as the pinnacle of Hendrix's career, and "the premiere example of [his] unparalleled genius as a rock guitarist ... In this performance, Jimi transcended the medium of rock music, and set an entirely new standard for the potential of electric guitar." During the song's extended instrumental breaks, Hendrix created sounds with his guitar that sonically represented warfare, including rockets, bombs, and diving planes.
The Band of Gypsys album was the only official live Hendrix LP made commercially available during his lifetime; several tracks from the Woodstock and Monterey shows were released later that year. The album was released in April 1970 by Capitol Records; it reached the top ten in both the U.S. and the UK. That same month a single was issued with "Stepping Stone" as the A-side and "Izabella" as the B-side, but Hendrix was dissatisfied with the quality of the mastering and he demanded that it be withdrawn and re-mixed, preventing the songs from charting and resulting in Hendrix's least successful single; it was also his last.
On January 28, 1970, a third and final Band of Gypsys appearance took place; they performed during a music festival at Madison Square Garden benefiting the anti-Vietnam War Moratorium Committee titled the "Winter Festival for Peace". American blues guitarist Johnny Winter was backstage before the concert; he recalled: "[Hendrix] came in with his head down, sat on the couch alone, and put his head in his hands ... He didn't move until it was time for the show." Minutes after taking the stage he snapped a vulgar response at a woman who had shouted a request for "Foxy Lady". He then began playing "Earth Blues" before telling the audience: "That's what happens when earth fucks with space". Moments later, he briefly sat down on the drum riser before leaving the stage. Both Miles and Redding later stated that Jeffery had given Hendrix LSD before the performance. Miles believed that Jeffery gave Hendrix the drugs in an effort to sabotage the current band and bring about the return of the original Experience lineup. Jeffery fired Miles after the show and Cox quit, ending the Band of Gypsys.