El Museo del Barrio was founded in 1969 by artist and educator Raphael Montañez Ortiz in response to the interest of Puerto Rican parents, educators, artists and activists in East Harlem who were concerned that their cultural experience was not being represented by New York’s major museums.  The contexts of El Museo's founding were the national civil rights movement and, in the New York City art world, the campaign that called for major art institutions to decentralize their collections and to represent a variety of non-European cultures in their collections and programs.

From the outset, El Museo defined itself as an institution that would educate through a collection of culturally significant objects and as a place of cultural pride and self-discovery for the founding Puerto Rican community. Initially El Museo operated in a public school classroom as an adjunct to the local school district, and then in brownstones in el barrio, the Spanish-speaking neighborhood that extends from 96th Street to the Harlem River and from Fifth Avenue to the East River on Manhattan's Upper East Side.  Between 1969 and 1976, El Museo moved to a series of storefronts on Third and Lexington Avenues, in the heart of el barrio. In 1977 El Museo found a permanent home in the spacious, neo-classical Heckscher Building at 1230 Fifth Avenue.

The move to upper Fifth Avenue allowed El Museo to maintain contact with its core community yet reach out to a wider non-Latino audience. In 1978 El Museo became a founding member of the Museum Mile Association, nine of the city's most distinguished cultural institutions along 20 historic and scenic blocks on Fifth Avenue, including The Metropolitan Museum of Art, the Guggenheim Museum, the Jewish Museum, and The Museum of the City of New York. The accessibility of the site, participation in this prestigious association, one of New York City's major tourist attractions, and a growing interest in Latin American art have brought a huge increase in our non-Latino visitors, today about 40% of our audience.

In 1977 El Museo was made a member of the Cultural Institutions Group of the City of New York by an act of public policy of the Mayor of New York. This organization encompasses 31 cultural institutions housed in city-owned buildings, from large, world-famous ones like The Metropolitan Museum of Art, to small, community-based ones like El Museo. Through substantial funding, CIG membership acknowledges the importance of the cultural services these institutions render to the population of New York City.

El Museo's educational mission continues to drive its collections and programs. At the same time, El Museo has broadened its mission, collections, and programs in response to substantial growth in the Mexican, Central and South American, and Caribbean communities, both in New York and nationally. El Museo's permanent collection remains a treasured resource for developing exhibitions and education programs. In recent years the public programs have been developed to address the educational needs of diverse populations—seniors, adults, adolescents, public school students, and very young visitors. Currently, El Museo has in place an experienced, professional staff, including the first generation of Latinos/as to specialize in the arts and to be trained in curatorial practice.

In 1994, El Museo completed an intensive, searching institutional self-study and long range plan. Board, staff, and consultants reviewed and re-affirmed El Museo's mission and program, setting out concrete objectives for institutional and program development through the year 2000. In 1995, El Museo's staff, in concert with a board committee, prepared an overview of capital construction priorities to be addressed over the next 10-15 years. In addition, El Museo has developed its first Long Range Financial and Fundraising Plan. The board and the director have established several task forces, composed of board, staff, and advisors, to focus the museum's efforts and to ensure systematic application of professional standards to each of El Museo's core programs and special initiatives.