Files were first exchanged on removable media.

Computers were able to access remote files using filesystem mounting, bulletin board systems (1978), Usenet (1979), and FTP servers (1985). Internet Relay Chat (1988) and Hotline (1997) enabled users to communicate remotely through chat and to exchange files.

 

The mp3 encoding, which was standardized in 1991 and which substantially reduced the size of audio files, grew to widespread use in the late 1990s. In 1998, MP3.com and Audiogalaxy were established, the Digital Millennium Copyright Act was unanimously passed, and the first mp3 player devices were launched. MP3.com offered music by unsigned artists, and grew to serve 4 million audio downloads daily.

In June 1999, Napster was released as a centralized unstructured peer-to-peer system, requiring a central server for indexing and peer discovery. It is generally credited as being the first peer-to-peer file sharing system. In the case of Napster, an online service provider could not use the "transitory network transmission" safe harbor in the DMCA if they had control of the network with a server. Many P2P products will, by their very nature, flunk this requirement, just as Napster did. Napster provided a service where they indexed and stored file information that users of Napster made available on their computers for others to download, and the files were transferred directly between the host and client users after authorization by Napster.

Gnutella, eDonkey2000, and Freenet were released in 2000, as MP3.com and Napster were facing litigation. Gnutella, released in March, was the first decentralized file sharing network. In the gnutella network, all connecting software was considered equal, and therefore the network had no central point of failure. In July, Freenet was released and became the first anonymity network. In September the eDonkey2000 client and server software was released.

In 2001, Kazaa and Poisoned for the Mac was released. Its FastTrack network was distributed, though unlike gnutella, it assigned more traffic to 'supernodes' to increase routing efficiency. The network was proprietary and encrypted, and the Kazaa team made substantial efforts to keep other clients such as Morpheus off of the FastTrack network.

In July 2001, Napster was sued by several recording companies and lost in A&M Records, Inc. v. Napster, Inc.. Shortly after loss in court Napster has been shut down to comply with court order. This drove users to other P2P applications and file sharing continued its exponential growth. The Audiogalaxy Satellite client grew in popularity, and the LimeWire client and BitTorrent protocol were released. Until its decline in 2004, Kazaa was the most popular file sharing program despite bundled malware and legal battles in the Netherlands, Australia, and the United States. In 2002, a Tokyo district court ruling shut down File Rogue and an RIAA lawsuit effectively shut down Audiogalaxy.

Demonstrators protesting The Pirate Bay raid, 2006.

From 2002 through 2003, a number of BitTorrent services were established, including Suprnova.org, isoHunt, TorrentSpy, and The Pirate Bay. In 2002, the RIAA was filing lawsuits against Kazaa users. As a result of such lawsuits, many universities added file sharing regulations in their school administrative codes (though some students managed to circumvent them during after school hours). With the shut down of eDonkey in 2005, eMule became the dominant client of the eDonkey network. In 2006, police raids took down the Razorback2 eDonkey server and temporarily took down The Pirate Bay. Pro-piracy demonstrations took place in Sweden in response to the Pirate Bay raid.

In 2009, the Pirate Bay trial ended in a guilty verdict for the primary founders of the tracker. The decision was appealed, leading to a second guilty verdict in November 2010. In October 2010, Limewire was forced to shut down following a court order in Arista Records LLC v. Lime Group LLC but the gnutella network remains active through open source clients like Frostwire and gtk-gnutella. Furthermore, multi-protocol file sharing software such as MLDonkey and Shareaza adapted in order to support all the major file sharing protocols, so users no longer had to install and configure multiple file sharing programs.