In 1942, Isabel Briggs Myers and her mother Katharine Briggs began the work of developing a "sorter" instrument to help people identify their psychological type preferences, as described by the theory of C. G. Jung. They tested their concepts by creating an individual item (a question on the Indicator) and then began collecting data to determine whether that item accurately measured what was intended. Isabel Myers recorded her research notes on thousands of index cards, which are now a part of the archives at the University of Florida in Gainesville.

Myers and Briggs first tested the items for the Indicator on a group of about 20 relatives and friends whose type they felt they knew from observation over many years. If an item consistently seemed to indicate a preference, it was added to the Indicator; if it did not, it was discarded. As data started to grow, larger samples were used to check validity of items or to determine item weights. Most people in the samples were adults, as Myers believed they would generally be clearer about their preferences. However, the Swarthmore College class of 1943 was included, and later information was collected from many other students of college age.

Form C of the MBTI^® instrument was developed by 1944. Myers took a part-time job with the Human Resources Director of a large company in order to familiarize herself with personality sorting instruments then in use. She persuaded her boss to give the Indicator to everyone who applied for employment.

Early forms of the Indicator were tested, beginning in 1951, with 5,355 medical students at 45 medical schools. The goal was to determine which types might end up more content in the medical profession and which types would end up choosing certain medical specialties. The results of that study were presented by Myers at the American Psychological Association conference in 1964.

A study of 10,000 nurses was undertaken the same year and provided large amounts of data that further validated the instrument.

In 1957 Isabel Myers took the Indicator to Educational Testing Services (ETS) in Princeton, New Jersey. Professionals at ETS were quite impressed with the methodology and results of her work. In 1962, the Indicator and its accompanying manual were published by ETS for research purposes. Also in 1962, Isabel Briggs Myers wrote and self-published a booklet called Introduction to Type in order to introduce the general public to the practical applications of the instrument. This simple yet comprehensive book is still in print and continues to be among the most popular MBTI introductory and educational materials. In 1970, a typology lab was established in Gainesville, Florida. In 1975, Isabel Myers and Mary McCaulley, Ph.D., a clinical psychologist who had used the Indicator in her practice, founded the Center for Applications of Psychological Type™ (CAPT^®) in Gainesville and became lifelong collaborators.

By the time of Isabel's death in 1980, the MBTI instrument had begun to be widely used by organizational consultants to help employees work together better, by career counselors to help people make good career decisions, by educators, and by many others who sought to enhance communication and understanding.