The first manifestation of the group was established during 1969 in New York city, with Tim Hauser, Erin Dickins, Marty Nelson, Gene Pistilli, and Pat Rosalia. They contracted with Capitol Records, recorded several tracks, and during 1971 issued their only album with this line-up, Jukin'. The album was later reissued in the UK by EMI's Music for Pleasure under the title The Manhattan Transfer and Gene Pistilli Pistilli had been best known for his performing and songwriting collaborations with Terry Cashman and Tommy West. This team endured only until 1971. According to Tim Hauser, "Gene and I were in two different places. He was more into country & western, R&B, and the Memphis sound, and by then I'd become more interested in jazz and swing..."

The current group (still together as of 2010) was founded during 1972 by Tim Hauser and singers Alan Paul, Janis Siegel, and Laurel Massé. Performances at Max's Kansas City, Trude Heller’s and Reno Sweeney with Herb Abramson's A-1 Sound engineer Jim Reeves in New York City soon developed for them a cult fan base, and it was at the latter venue that Ahmet Ertegün, founder and chairman of Atlantic Records, saw them and offered a recording contract which resulted in the release, during 1975, of this team's first album, The Manhattan Transfer. The album included the group’s first successful single, the gospel tune "Operator". During the summer of 1975, the Manhattan Transfer were showcased in their own hour-long television variety series on CBS.

The group soon did very well in Europe, where the next two albums, Coming Out and Pastiche, brought a string of top 10 successes. One was a revival of Wayne Shanklin's "Chanson D'Amour", which rated number one in the UK and Australia in 1977 but failed to chart in the US. These successes were followed by a live-recorded album, The Manhattan Transfer Live, recorded in the UK.

Soon after that album was recorded, during 1978, Laurel Massé was injured badly by an auto accident and was replaced by Cheryl Bentyne. The team has remained the same since then.

Their next recording, Extensions, earned The Manhattan Transfer their second US popular music success: "Twilight Zone/Twilight Tone", written by Alan Paul and Jay Graydon as a tribute to the 1960s’ CBS television series created by Rod Serling.

In the UK the group is also known for its guest appearances on The Two Ronnies.

Extensions featured a cover of Weather Report's "Birdland", with lyrics by Jon Hendricks, the piece that has become The Manhattan Transfer's signature tune. One of the most popular jazz recordings of 1980, "Birdland" brought The Transfer its first Grammy award (Best Jazz Fusion Performance, Vocal or Instrumental), and the award for Best Arrangement For Voices.

During 1981, The Manhattan Transfer made music history by becoming the first group to win Grammy awards for both popular and jazz categories in the same year. "Boy from New York City" (a cover of the 1965 success by The Ad Libs), which scored in the top 10 on the popular charts, won them the award for Best Pop Performance by a Duo or Group with Vocal, and "Until I Met You (Corner Pocket)" earned them a Grammy for Best Jazz Performance, Duo or Group. Both of these songs appeared on the group's fifth album, Mecca for Moderns.

During 1982, the group won another Grammy, for Best Jazz Vocal Performance, Duo or Group, for its rendition of the classic ode-to-the-road, "Route 66". The song was on the soundtrack to the Burt Reynolds film Sharky's Machine.

During September 1983 the team produced the album Bodies and Souls, with an urban-contemporary style which resulted in two R&B-chart singles — the #2 "Spice of Life" (also #40 on the pop chart) and the ballad "Mystery" (#80 R&B, #102 Pop). Despite its disappointing chart performance, "Mystery" — with powerful lead vocals by Siegel — has become one of the group's best-loved songs. Hauser has called it the group's biggest turntable (radio airplay) success. Anita Baker covered it on her "breakout" album, Rapture.