The clubs kept the long version. The album got the edit.
In April 1979, at Alpha Studios in Burbank, Prince tracked Sexy Dancer alone. He was twenty years old and still playing every part on his records. The take ran close to nine minutes: a four-on-the-floor groove, a keyboard solo, extra spots for bass and a feedback guitar, and a breakdown where the rhythm just sat. Engineer Gary Brandt ran the session, with Mark Ettel assisting. On 29 May the tape moved to Hollywood Sound Recorders for overdubs and a mix. Bob Mockler, who supervised that mix, told biographer Per Nilsen that Prince did not yet know what to leave in.
The second album, Prince, came out on 19 October 1979 on Warner Bros. Sexy Dancer is track three. The sleeve lists Prince on clavinet, drums, Pollard Syndrums, bass, Yamaha CP-70, electric guitar, ARP String Ensemble, Polymoog, handclaps and vocals. Mockler and Prince are credited with the remix. The album edit lands at 4:18. The long version, 8:50, waited for a 12-inch.
Warner did not issue the song as a US single. In the clubs it did not need one. Billboard’s Disco Top 100, built from DJ playlists, listed Sexy Dancer together with I Wanna Be Your Lover. The pairing entered at number 16 on 15 December 1979 and peaked at number 3 in the weeks of 19 and 26 January 1980. I Wanna Be Your Lover, the actual US single, had already given Prince his first Hot 100 hit, number 11, and a number 1 on the R&B chart.
Prince didn’t understand editing, but I knew where to cut it so it was least intrusive. The only reason he knew where the cut was, was because he knew the music, but he was still amazed.
(Bob Mockler to Per Nilsen, 1999)

The commercial single arrived later, and only outside America. On 11 April 1980 Warner Bros. put Sexy Dancer out in the UK and Japan. The UK 7-inch, catalogue K 17590, pairs the album cut with Bambi. The UK 12-inch, K 17590T, carries the 8:50 long version, the first extended Prince single, with Bambi again on the back. The Japanese 7-inch, P-566W, uses Why You Wanna Treat Me So Bad? as the B-side. It did not chart in either country.
On stage it showed up fast. The first known live date is 26 November 1979 at the Roxy in West Hollywood, a month after the album. It stayed in the set on the Prince tour, the Rick James dates in 1980, and the Dirty Mind tour. Years later he would drop the groove under other lyrics, including Chic’s Le Freak, but the 1979 record is the one Mockler cut so a nine-minute jam could sit as track three. Prince could hear the edit because he had played every part. He was still surprised it worked.