Files were first exchanged on removable media. Computers were able to access remote files using filesystem mounting, bulletin board systems (1978), Usenet (1980), 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.

USENET was created in 1979.^[1] It is a network that was initially based on the UUCP protocol for dial-up connections and has, since being transported over the Internet, used a specialized client-server protocol, the Network News Transfer Protocol (NNTP). Its main purpose was the exchange of text based messages, but through attachments allows users to encode files and distribute them to participating subscribers of Usenet newsgroups. USENET remains one of the largest carriers of file sharing and Internet traffic.^[2][3] Recently legal challenges to P2P systems have spurned a resurgence of Usenet.^[4] USENET has also been itself the target of legal challenges pertaining to its use in file sharing.^[5]

In June 1999, Napster was released. Although Napster does not strictly fit into the profile of peer-to-peer software,^[6] it is generally perceived as being the first peer-to-peer file sharing system. In the Napster case ^[7], an online service provider cannot use the "transitory network transmission" safe harbor in the DMCA if they have control of the network with a server. Many P2P products will, by their very nature, flunk this requirement, just as Napster did. ^[8]. Full P2P software like USENET does meet that requirement thus cannot be shut down. 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. Shortly after the A&M Records, Inc. v. Napster, Inc. loss in court Napster blocked all copyright content from being downloaded.

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 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 lost in court and was shut down. This drove users to other P2P applications and file sharing continued it's exponential growth. ^[9] The Audiogalaxy Satellite client grew in popularity, and the LimeWire client and BitTorrent protocol were released. Kazaa was the most popular file sharing program until its decline in 2004, 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.

From 2002 through 2003, a number of popular 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. 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-file sharing demonstrations take 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.

As of 2009, Gnutella via Limewire, the eDonkey network via eMule, and BitTorrent via uTorrent and Azureus and the trackers & indexing sites are the most popular networks.^{[citation needed]} Services like iTunes account for much of legal music sales, and sites like YouTube and various one-click hosting providers allow file sharing through uploads to their servers.