The core principle of Tor, "onion routing", was developed in the mid-1990s by United States Naval Research Laboratory employees, mathematician Paul Syverson, and computer scientists Michael G. Reed and David Goldschlag, with the purpose of protecting U.S. intelligence communications online. Onion routing was further developed by DARPA in 1997.
The alpha version of Tor, developed by Syverson and computer scientists Roger Dingledine and Nick Mathewson and then called The Onion Routing project, or Tor project, launched on 20 September 2002. The first public release occurred a year later. On 13 August 2004, Syverson, Dingledine, and Mathewson presented "Tor: The Second-Generation Onion Router" at the 13th USENIX Security Symposium. In 2004, the Naval Research Laboratory released the code for Tor under a free license, and the Electronic Frontier Foundation (EFF) began funding Dingledine and Mathewson to continue its development.
In December 2006, Dingledine, Mathewson, and five others founded The Tor Project, a Massachusetts-based research-education nonprofit organization responsible for maintaining Tor. The EFF acted as The Tor Project's fiscal sponsor in its early years, and early financial supporters of The Tor Project included the U.S. International Broadcasting Bureau, Internews, Human Rights Watch, the University of Cambridge, Google, and Netherlands-based Stichting NLnet.
From this period onward, the majority of funding sources came from the U.S. government.
In November 2014 there was speculation in the aftermath of Operation Onymous that a Tor weakness had been exploited. A BBC source cited a "technical breakthrough" that allowed the tracking of the physical locations of servers. In November 2015 court documents on the matter, besides generating serious concerns about security research ethics and the right of not being unreasonably searched guaranteed by the US Fourth Amendment, may also link the law enforcement operation with an attack on Tor earlier in the year.
In December 2015, The Tor Project announced that it had hired Shari Steele as its new executive director. Steele had previously led the Electronic Frontier Foundation for 15 years, and in 2004 spearheaded EFF's decision to fund Tor's early development. One of her key stated aims is to make Tor more user-friendly in order to bring wider access to anonymous web browsing.
In July 2016 the complete board of the Tor Project resigned, and announced a new board, made up of Matt Blaze, Cindy Cohn, Gabriella Coleman, Linus Nordberg, Megan Price, and Bruce Schneier.