The Bodley Head was founded in 1887 as a partnership between Exeter bookseller Charles Elkin Mathews and John Lane. The new shop opened in September of that year at 6B Vigo Street. Over its door was a sign depicting Rembrandt's head, which had been the insignia of the previous business on the site. Since Mathews had associated his Exeter shop with Exeter-born Sir Thomas Bodley, founder of the Bodleian Library at Oxford, he and Lane decided to replace the head with that of Bodley, which would represent the new firm. At first Lane was Mathews' silent partner, but he became active in the running of the firm in 1892. They specialised in books of verse and published many of the young poets of the 1890s, including the two Rhymers' Club volumes, as well as work by Le Gallienne, Arthur Symons and Kenneth Grahame, and also Oscar Wilde's Salome, with illustrations by Aubrey Beardsley. The most notorious journal of the 1890s, The Yellow Book, edited by Beardsley and Henry Harland, was another success.
The different temperaments and business styles of the two partners soon caused tension and after a dispute over the firm's authors the partnership was dissolved on 30 September 1894. Lane took the sign of the Bodley Head and moved to new premises in the Albany. Mathews remained in Vigo Street. Lane now concentrated mainly on publishing fiction, carrying on with previously established work such as the Keynotes series, and creating new opportunities including the Arcady Library, the Bodley Head Anthologies and Pierrot's Library. In 1921 The Bodley Head became a private limited-liability company.
Lane died on 2 February 1925, and control of the company passed to Allen Lane, a distant cousin. Despite successes such as Gertude Stein's The Autobiography of Alice B. Toklas (1933) and James Joyce's Ulysses (1936) the firm went into receivership in 1936 and the following year The Bodley Head was purchased by a consortium made up of the publishers George Allen & Unwin Ltd, Jonathan Cape, and J.M. Dent.
In 1957 the firm was bought by the merchant banking firm Ansbacher & Co. with Max Reinhardt, under whom it began once more to prosper. Reinhardt acquired T. Werner Laurie in 1957, Hollis & Carter in 1962, and G.P. Putnam, also in 1962, which included Bowes & Bowes Publishers Ltd (as opposed to the bookseller of the same name), and eventually purchased all the Ansbacher stock. As well as expanding the general list, Reinhardt presided over the creation of one of the best juvenile lists of its time, under the children's editor Judy Taylor. Other editorial staff included Barney Blackley, John Ryder, Margaret Clark, Jill Black, James Michie, Guido Waldman and David Machin. Amongst the firm's authors during this period were Georgette Heyer, Alistair Cooke, Alexander Solzhenitsyn, and Graham Greene, who became a director. In 1973, in response to the financial pressures being felt throughout the publishing industry, The Bodley Head formed a loose conglomerate with Chatto & Windus and Jonathan Cape in order to pool marketing, warehouse, accountancy and distribution services while maintaining editorial and design independence. The gambit proved successful, and the three firms continued to profit throughout the 1970s. In 1981 David Machin became managing director, at first jointly with Reinhardt and later alone, with Reinhardt moving to a position as Executive Chairman.
Reinhardt sold the firm to Random House in 1987, due to ill health. Random House continues to publish children's books under The Bodley Head imprint.