Forrest Mars, Sr., founder of the Mars Company, got the idea for the confection in the 1930s during the Spanish Civil War when he saw soldiers eating chocolate pellets with a hard shell surrounding the inside, preventing them from melting. Mars received a patent for his own process on March 3, 1941. Production began in 1941 in a factory located at 285 Badger Avenue in Clinton Hill, Newark, New Jersey. One M was for Forrest E. Mars Sr., and the other M was for Bruce Murrie, son of long-term Hershey president William F.R. Murrie. Murrie had 20 percent interest in the product. The arrangement allowed the candies to be made with Hershey chocolate which had control of the rationed chocolate. When operations were started, the hard-coated chocolates were made in seven different colors: Blue, Brown, Yellow, Orange, Red, Green and Violet. They were served in a cardboard tube. During World War II, M&Ms were sold exclusively to the US Army.

In 1954, Peanut Chocolate Candies were introduced, while the M&M's brand characters and the famous slogan "The milk chocolate that melts in your mouth, not in your hand" were both trademarked.