The party was founded by H. M. Hyndman and his followers after his defeat in the leadership elections of the British Socialist Party. They believed that it was desirable to support Britain in World War I against "Prussian militarism". Although maintaining that they were a Marxist party, after affiliation to the Labour Party in 1918, they renounced vanguardism and saw in the Russian Revolution only the danger that it might weaken Britain's war effort.
Six members of the party were elected to parliament in the 1918 election. In 1919, it changed its name to the Social Democratic Federation, and at one point had eleven MPs, but after the death of Hyndman in 1921, the group gradually faded into the Labour Party.