FSAE traces its roots back to SAE Mini Baja which began back in the mid ‘70s.The emphasis at Mini Baja is on chassis design, as each of the teams used an identical 8-hp B&S engine that cannot be modified.In 1978, Kurt Marshek, of the University of Houston, contacted the SAE Educational Relations Department proposed a variation of the Mini Baja competition.Because the emphasis of the Mini Baja competition is on chassis design, Marshek thought there would be even more engineering opportunities if vehicle systems like the engine were unrestricted by the rules.This new competition was dubbed SAE Mini Indy and was first held in 1979. Thirteen schools entered, and eleven competed the first year. Because of the difficultly of planning and hosting a SAE competition no one volunteered to run the competition in 1980.

After the failure to hold an event in 1980, the rules were restructured to be as unlimited as possible. The new rules would restrict the engines as little as possible. Any four-stroke engine was allowed for the next four years however the power was limited by a 25.4 mm intake restriction. Because of the new, reinvented competition, it was thought that a new name was needed and the Formula SAE name was adopted. Even with the new rules only four schools ended up attending the inaugural Formula SAE competition.

In 1984 diesel, methanol and ethanol all became legal fuels along with pump gas. Now however only ethanol and gasoline are legal fuels.

1985 was the first year a university other than the University of Texas, Austin hosted the event with their neighbors in Arlington hosting the event. Bob Woods of Arlington took advantage of this change by implementing a major rules rewrite along with a revision of the competition scoring. This revision made the static events a portion of the overall competition. The competition was now judged on a basis of a 1000 point scale. This scale also included a cost report as part of the static events. Students were required to submit a report for the manufacturing costs of 1000 units. The maximum accepted value was $4500 per unit. Other new rules in 1985 included the addition of an engine displacement cap of 610 cm3 and an intake restriction reduction to 23 mm.

In 1986 the location of the competition changed again, however this was the first time it was held outside of Texas. The Lawrence Institute of Technology (now known as Lawrence Technological University) hosted the event. The competition continued to alternate between Texas and Michigan until 1990.

In 1991, the Formula SAE competition received its first major corporate sponsorship from GM. In 1992 the event was hosted by Ford and by Chrysler the following year. After the competition in 1993 General Motors, Ford Motor Co, and Chrysler Corp formed a consortium and began to run Formula SAE together.

In 1997 the first European team entered the Formula SAE competition and in 1998 Formula Student (the UK version of Formula SAE) was begun. event, This competition was co-sanctioned by SAE and represented that Formula SAE had obtained international status.