The University Co-op was founded in 1896 by Dr. William J. Battle, a professor of the Greek language who later served as president of the university from 1914 to 1916. Disappointed with the services and high book prices charged by a privately owned bookstore on campus, Dr. Battle organized support for creating a bookstore like the Harvard Co-op that was an association owned by students, faculty, and staff to furnish books, supplies, and clothing at discounted prices to its members. The original store opened on campus - it was located in the university's Main Building - with books, stationery and athletic goods and the intent to sell its products to students at the lowest possible prices.

Twenty-two years later (1918) the Co-op moved off campus to a one-story building on Guadalupe across from the Student Union Center and started selling merchandise to local citizens as well. With rising profits in the 1920s, the Co-op contributed to a fund drive to build a new athletic stadium and enlarge the campus from its original 40 acres.

By 1935, the Co-op had to expand to meet the needs of a growing student body. The Co-op remained a co-operative until 1977, when it became a 501(c)(3) not-for-profit educational corporation owned by the students, faculty and staff of The University of Texas at Austin. Nonetheless, the Co-op has stayed true to the original idea and mission, as well as continuing and improving the patronage rebate program. As the Co-op became more successful, the rebate percentage also increased. For the past several years, the rebate has been a full 10% of the value of the submitted receipts.

In 1987, at a time when the business was failing and the competition was fierce, the Co-op Board hired George H. Mitchell as President. He has led the store into unprecedented growth and profit. In 1994, the Co-op built a modern store on Dean Keeton to serve the East side of campus. The first store outside of Austin was the University Co-op in Houston, which opened its doors to a welcoming crowd of fans and alumni in August 2007, followed by San Antonio Co-op in 2008, Dallas Co-op in 2009 and Fort Worth Co-op in 2010.

The University Co-op's mission is to advance the educational interests of the University. Earnings support campus events, grants and activities, including the prestigious Robert W. Hamilton Book Awards to recognize faculty authors, the George H. Mitchell Student Awards for Academic Excellence and the Michael H. Granof Awards for Excellence in Graduate Education.

Since the year 2000, the University Co-op has given over 32 million dollars to UT including rebates to students.