The first Kerrville Folk Festival was held June 1 through 3, 1972, in the 1,200-seat Kerrville Municipal Auditorium; 2,800 fans from all over Texas and as far away as Colorado attended the thirteen-performer event. The festivals at Kerrville were a direct outgrowth of the Austin Zilker Park KHFI–FM Summer Music festivals (1964–68), the Chequered Flag folk-music club on Lavaca Street in Austin (1967–70), and the eight Longhorn Jazz festivals (1966–73), as well as the "live" and recorded programs of Austin folk artists produced on KHFI–AM–FM–TV during the 1950s, 1960s, and early 1970s. Performers included Allen Damron, Willis Alan Ramsey, Jerry Jeff Walker, Michael (Martin) Murphey, Townes Van Zandt, Kenneth Threadgill, Carolyn Hester, Frummox (Steven Fromholz and Dan McCrimmen), Rusty Wier, Three Faces West (including Ray Wylie Hubbard), Bill and Bonnie Hearne, Mance Lipscomb, Bill Neely, and others. Many of them emerged as national recording artists identified with the "Austin Sound."
The first Kerrville Folk Festival included many of the Austin artists as well as National Fiddling Champion Dick Barrett of Pottsboro and Peter Yarrow (of Peter, Paul, and Mary). The 1973 festival expanded to five concerts in three nights, and 5,600 people jammed the auditorium. Among the new performers were Willie Nelson and B. W. Stevenson. The success of the event led to a search for larger quarters, preferably an outdoor location. In December 1973 a sixty-acre plot was acquired nine miles south of Kerrville on State Highway 16 and dubbed the Quiet Valley Ranch to keep from frightening the neighbors. Work began immediately dozing thousands of cedar stumps and debris from a previous runaway fire. Construction began on a stage, a seating area, a concession stand, underground water and wiring, and 6,000 feet of deer-proof seven-foot fencing.
The facilities (except for camping facilities) were completed, outhouses rented, and the first outdoor festival held on the new stage on May 23–26, 1974; the schedule had been expanded to four nights. Asleep at the Wheel, Flaco Jiménez, and Chubby Wise were among the first-time performers, who drew a crowd of 6,000. Lucinda Williams was among the New Folk finalists. The gates were opened daily at 6 P.M., and the concerts started at 8. The nonprofit Kerrville Music Foundation, Incorporated, was established in 1975 to help beginning songwriters and, for many years, also promoted and worked to preserve such traditional art forms as country yodeling, harmonic and mandolin playing, and bluegrass music. While attendance was growing, a spirit also grew out of the warm ambience of the festival, which has been described as "spiritual optimism." The campfire singing in the now-developed campgrounds became a worldwide trademark of the festival, which maintained its momentum in spite of seven years of heavy rains out of the first nineteen.
In 1980 crowds reached 13,000, and the festival expanded to eleven days for its tenth anniversary in 1981. The present expanded and cantilevered stage was built in three weeks by volunteers that year. In 1986 the festival celebrated its fifteenth anniversary with an eleven-day festival, a special documentary album, and a musicians' fifteen-day tour of nine states on behalf of the Texas Sesquicentennial as official state ambassadors. The next year the festival expanded to its present format of eighteen days, which includes three weekends.
By the 1990s attendance had grown to 25,000. The program included an eighteen-day schedule of eleven six-hour evening concerts, New Folk Concerts with forty writers, Folk Mass celebrations, six two-hour children's concerts, and a four-day Festival of the Eagle honoring American Indians at a newly constructed and then expanded Threadgill Memorial Theater in the campgrounds. The festival has become America's largest and longest-running celebration of original songwriters and draws performers and fans from around the world. It remains a family affair with the same intimate atmosphere of the early years. A companion event, the Kerrville Wine and Music Festival, held over the Labor Day weekend, began in 1992. By the twenty-second season of the folk festival in 1993 more than two dozen of its early "unknown" performers had earned national recording contracts, including Lyle Lovett, Nanci Griffith, Hal Ketchum, David Wilcox, John Gorka, Tish Hinojosa, Pierce Pettis, Cliff Eberhart, Darden Smith, Michael Tomlinson, Lucinda Williams, James McMurtry, David Massengill, Steve Earle, Robert Earl Keen, Jr., Jon Ims, and the Flatlanders (including Joe Ely, Butch Hancock, and Jimmie Dale Gilmore).
When founder Rod Kennedy retired in 1999, the festival had amassed a loyal following of individuals, many of whom had never missed a single festival. From this festival community a group of investors emerged who purchased the name and rights to the festival, and Dalis Allen became the festival’s producer. In 2007 the Texas Folk Music Foundation was established as a 501(c)3 nonprofit and launched a capital campaign to purchase all related assets of the Kerrville Folk Festival, Inc. The capital campaign goal was reached, and the Texas Folk Music Foundation purchased the festival in 2008. In 2013 the nonprofit name was changed from the Texas Folk Music Foundation to the Kerrville Folk Festival Foundation. In 2015 the Kerrville Folk Festival Foundation hired Mary Muse as its executive director, and Dalis Allen continued to serve as producer. During its history, more than 1,500 singer–songwriters have performed at the festival. The Kerrville Folk Festival is the longest continuously-running music festival in the United States.