The party was founded in 1972 by M.G. Ramachandran (popularly MGR), a veteran star of the Tamil film industry, and a popular politician, as a breakaway outfit from the DMK led by M. Karunanidhi, the then chief minister, owing to difference between the two. The relations between the two parties have since been heavily tempered with mutual contempt.
The government led by DMK, was dismissed by a Central promulgation, after MGR filed a petition seeking enquiry into corruption charges. The party came to power in 1977, after trouncing DMK in the subsequent elections to the legislative assembly in the state and MGR became the Chief Minister. The tables were turned in 1980, when the government under MGR was dismissed, by the Congress government at the centre, which was an ally of DMK. However, AIADMK bounced back to power in the elections.
In 1984, with MGR's failing health, and his subsequent hospitalization abroad, the party still managed to win the state elections in his absence. Many political historians consider MGR's persona and charisma at this point of time as "infallible", and a logical continuation of his on-screen "good lad" image, strengthened by a "mythical status" of a phoenix. MGR continued to enjoy popular support in his third tenure, which ended in his demise on December 24, 1987.
Subsequently, MGR's wife Janaki Ramachandran rose to the party's leadership and led the government as the state's first woman chief minister for the rest of its tenure till 1989. The party, in the absence of a personality of MGR's calibre began to crumble with infighting and broke into two factions. J. Jayalalithaa, a former Tamil actress, led the second faction. The state elections in 1989, saw DMK rising back to power with Karunanidhi at the helm. The government was dismissed in 1990, when the government was accused of harbouring Tamil separatists operating in Sri Lanka.
In the elections of 1991, the faction led by Jayalalithaa, united with the main party, and was sweeped to power. Many political observers, have ascribed the landslide victory to the "sympathy-wave" arising out of the assassination of former Prmie Minister Rajiv Gandhi by suspected Tamil separatists. The ensuing government was accused of large-scale corruption, but Jayalalithaa managed to hold on to power for a full-term of five years. But, public anger aimed at her as a result of the various corruption charges, ensured that she lost by a landlside in the next election in 1996. DMK, in a see-saw battle, was at the rewarded end, and held power till 2001, which once again saw Jayalalithaa regainign the mantle.