Oakley was started by James Jannard in 1975 out of his garage with an initial investment of $300. The name "Oakley" came from a combination of Oakland and Berkeley, the two cities in California that Jannard frequently visited as a child. Jannard began by selling what he called 'The Oakley Grip' out of the back of his car at motoCrocs events. His motorcycle grips were unlike other grips available at the time, using a patented material known as 'Unobtanium', a unique creation by Jannard. The material is still used to make the earsocks on Oakley glasses, and many of the nose pieces. Oakley went on to produce number plates, gloves, grips, elbow guards, chin guards, and goggles for the BMX and motoCrocs communities.

In 1980, Jannard released a pair of goggles called the O-Frame. With the 'Oakley' logo present on the strap, the brand garnered increasing recognition and prominence throughout the sports industry. In 1983 Oakley began selling ski goggles.

The first Oakley sunglasses; Factory Pilot Eyeshades, were sport-oriented, resembling goggles and were released in 1984. These were followed in 1985 by the Oakley Frogskin, a casual sunglass style that was made in Japan.

The company went public in 1995, raising $230 million.