Despite significant European success during the 1970s, the 1980s had marked a low point for English football. Stadiums were crumbling, supporters endured poor facilities, hooliganism was rife, and English clubs were banned from European competition due to multiple deaths at games due to fights.  The Football League First Division, which had been the top level of English football since 1888, was well behind leagues in Italy and Spain and several top English players had moved abroad. However, by the turn of the 1990s England had been successful in the 1990 FIFA World Cup, reaching the semi-finals. UEFA, European football's governing body, lifted the five-year ban on English clubs playing in European competitions in 1990.

As stadiums improved and match attendance and revenues rose, the country's top teams considered leaving the Football League in order to capitalize on the growing  revenue being pumped into the sport.

At the close of the 1991 season, a proposal for the establishment of a new league was tabled that would bring more money into the game overall. The Founder Members Agreement, signed on 17 July 1991 by the game's top-flight clubs, established the basic principles for setting up the FA Premier League. The newly formed top division would have commercial independence from the Football Association and the Football League, giving the FA Premier League license to negotiate its own broadcast and sponsorship agreements. This was considered necessary so that English clubs could once again compete with and beat the best of Europe, while attracting the best talent in the world.

In 1992 the First Division clubs resigned from the Football League and on 27 May 1992 the FA Premier League was formed. This meant a break-up of the 104-year-old Football League that had operated until then with four divisions; the Premier League would operate with a single division and the Football League with three. There was no change in competition format; the same number of teams competed in the top flight, and promotion and relegation between the Premier League and the new First Division remained on the same terms as between the old First and Second Divisions.

The 22 inaugural members of the new Premier League were Arsenal, Aston Villa, Blackburn Rovers, Chelsea, Coventry City, Crystal Palace, Everton, Ipswich Town, Leeds United, Liverpool, Manchester City, Manchester United, Middlesbrough, Norwich City, Nottingham Forest, Oldham Athletic, Queens Park Rangers, Sheffield United, Sheffield Wednesday, Southampton, Tottenham Hotspur, and Wimbledon. (http://www.premierleague.com/page/History)