The Texas Folklife Festival grew out of ideas formed in 1968, when the University of Texas Institute of Texan Cultures took part in the Smithsonian Institution's National Folklife Festival in Washington, D.C. Inspired by the success of the national event, the Institute of Texan Cultures began planning a Texas festival.
Under the leadership of the exhibits director, O. T. Baker, the country's first statewide folklife festival was held September 7–10, 1972, as an extension of the educational programs of the Institute of Texan Cultures. A major thrust was to preserve and display the ethnic traditions and pioneer skills that had helped to form the Lone Star State. Essential initial funding was provided by the Moody Foundation of Galveston, the Houston Endowment, and the Ewing Halsell Foundation of San Antonio. Hundreds of individuals, as well as various fraternal, ethnic, social, religious, professional, commercial, and industrial organizations, provided goods, services, and equipment. The San Antonio Hotel Association and the H. B. Zachry Company, general contractors, provided other essential services.
Since the first year the festival has been entirely self-supporting. In addition, food and beverage sales have provided millions of dollars to participating groups to help sustain their ethnic and cultural programs. The Texas Folklife Festival has been held every year since 1972 on the Institute of Texan Cultures grounds at the HemisFair '68 plaza in San Antonio. Paid admissions that first year totaled $63,565, and many more were admitted free the first two nights because some of the food booths ran short of food. Some 2,000 participants and staff provided entertainment, demonstrated skills, served food, played music, or worked in other program areas.
In 1973 the festival was caught in the middle of Hurricane Delia, and after the first three years the festival was moved to early August to avoid the September rains. Claudia Ball took over from O. T. Baker as festival director in 1976 and served in that capacity through 1980. Jo Ann Andera became festival director in 1981 and continued to serve through 2015.
Beginning in the year 2000, the festival was moved from August to June to avoid the hottest part of the summer. In the years when bad weather has interfered, the activities have simply moved onto the covered veranda surrounding the institute building. In 2011 the festival, a three-day event that showcased the food, music, crafts, and dance of some forty cultures, celebrated its fortieth anniversary. By 2014 the festival was held over two days.