The band formed in Dublin on 25 September 1976. Larry Mullen, Jr., then 14, posted a notice on his secondary school notice board (Mount Temple Comprehensive School) seeking musicians for a new band. Seven teenage boys attended the initial practice in Mullen's kitchen. It was, as Mullen put it, "'The Larry Mullen Band' for about ten minutes, then Bono walked in and blew any chance I had of being in charge." The group featured Mullen on drums, Paul Hewson (Bono) on lead vocals, Dave Evans (The Edge) and his brother Dik Evans on guitar, Adam Clayton, a friend of the Evans brothers on bass guitar, and initially Ivan McCormick and Peter Martin, two other friends of Mullen. Soon after, the group settled on the name "Feedback", because it was one of the few technical terms they knew. Martin did not return after the first practice, and McCormick left the group within a few weeks. Most of the group's material initially consisted of cover versions, which the band said was not their forte. The original material the band did write demonstrated a sound influenced by their post-punk peers.

In March 1977, the band changed their name to "The Hype". Dik Evans, who was older and by this time at college, was becoming the odd man out. The rest of the band was leaning towards the idea of a four-piece ensemble and he was "phased out" in March 1978. During a farewell concert in the Presbyterian Church Hall in Howth, which featured The Hype playing covers, Dik ceremoniously walked offstage. The remaining four band members completed the concert playing original material as "U2". Steve Averill, a punk rock musician and family friend of Clayton's, had suggested six potential names from which the band chose "U2" for its ambiguity and open-ended interpretations, and because it was the name that they disliked the least.

On Saint Patrick's Day in 1978, U2 won a talent show in Limerick, Ireland. The prize consisted of £500 and funding to record a demo, which was an important milestone and affirmation for the fledgling band. The band recorded their first demo tape at Keystone Studios, in Harcourt Street, Dublin, in April 1978. In May, Paul McGuinness, who had earlier been introduced to the band by Hot Press journalist Bill Graham, agreed to be U2's manager. U2's first release, an Ireland-only EP entitled Three, was released in September 1979 and was the band's first Irish chart success. In December 1979, U2 performed in London for their first shows outside Ireland, although they failed to get much attention from audiences or critics. In February 1980, their second single "Another Day" was released on the CBS label, but again only for the Irish market.

Island Records signed U2 in March 1980, and "11 O'Clock Tick Tock" became the band's first internationally released single that May. The band's debut album, the Steve Lillywhite produced Boy, followed in October, and received generally positive reviews. Although Bono's lyrics were unfocused and seemingly improvised, a common theme was the dreams and frustrations of adolescence. The album included the band's first United Kingdom hit single, "I Will Follow". Boy's release was followed by U2's first tour of continental Europe and the United States. Despite being unpolished, these early live performances demonstrated U2's potential, as critics noted that Bono was a "charismatic" and "passionate" showman.

The band's second album, October, was released in 1981 and contained overtly spiritual themes. During the album's recording sessions, Bono and The Edge left the band due to spiritual conflicts, and U2 ceased to exist for a brief period of time. Bono, The Edge, and Mullen had joined a Christian group in Dublin called the 'Shalom Fellowship', which led them to question the relationship between the Christian faith and the rock and roll lifestyle. The album received mixed reviews and limited radio play. It did not sell well outside of the UK, which put pressure on their contract with Island and focused the band on improvement.

Resolving the doubts of the October period, U2 released War in 1983. A record where the band "turned pacifism itself into a crusade," War's sincerity and "rugged" guitar was intentionally at odds with the "cooler" synth-pop of the time. The album included "Sunday Bloody Sunday," where Bono had lyrically tried to contrast the events of Bloody Sunday with Easter Sunday. Rolling Stone magazine wrote that the song showed the band was capable of deep and meaningful songwriting. War was U2's first album to feature the photography of Anton Corbijn, who remains U2's principal photographer and has had a major influence on their vision and public image. U2's first commercial success, War debuted at number one in the UK, and its first single, "New Year's Day", was the band's first hit outside Ireland or the UK.

On the subsequent War Tour, the band performed to sold-out concerts in mainland Europe and the U.S. The image of Bono waving a white flag during performances of "Sunday Bloody Sunday" became a familiar sight. U2 recorded the Under a Blood Red Sky live album on this tour, as well as the Live at Red Rocks concert film, both of which received extensive play on the radio and MTV, expanding the band's audience and cementing the band's prowess as a live band. Their generally unfavourable record deal with Island Records was coming to an end, and in 1984 U2 signed a highly lucrative extension. They negotiated the return of their copyrights (such that they owned the rights to their own songs), an increase in their royalty rate, and a general improvement in terms, at the expense of a larger initial payment.

In July 2008 (2008-07), U2 released re-mastered and deluxe versions of Boy, October, and War.

The Unforgettable Fire was released in 1984. Ambient and abstract, it was at the time the band’s most marked change in direction. The band feared that following the overt rock of the War album and tour, they were in danger of becoming another "shrill", "sloganeering arena-rock band". Thus, experimentation was sought as Adam Clayton recalls, "We were looking for something that was a bit more serious, more arty." The Edge admired the ambient and "weird works" of Brian Eno, who, along with his engineer Daniel Lanois, eventually agreed to produce the record.

The Unforgettable Fire has a rich and orchestrated sound. Under Lanois' direction, Larry's drumming became looser, funkier, and more subtle and Adam's bass became more subliminal; the rhythm section no longer intruded, but flowed in support of the songs. Complementing the sonic atmospherics, the album's lyrics are open to many interpretations, providing what the band called a "very visual feel". Bono's recent immersion in fiction, philosophy, and poetry made him realise that his songwriting responsibilities—about which he had always been reluctant—were a poetic one. Due to a tight recording schedule, however, Bono felt songs like "Bad" and "Pride (In the Name of Love)" were incomplete "sketches". "Pride (In the Name of Love)", about Martin Luther King, was the album's first single and became the band's biggest hit at that point, including being their first to enter the U.S. top 40.

Much of The Unforgettable Fire Tour moved into indoor arenas as U2 began to win their long battle to build their audience. The complex textures of the new studio-recorded tracks, such as "The Unforgettable Fire" and "Bad", were problematic to translate to live performance. One solution was programmed sequencers, which the band had previously been reluctant to use, but are now used in the majority of the band's performances. Songs on the album had been criticised as being "unfinished", "fuzzy", and "unfocused", but were better received by critics when played on stage.
U2's performance at Live Aid was a turning point in their career.U2 participated in the Live Aid concert for Ethiopian famine relief at Wembley Stadium in July 1985. U2's performance was a turning point in the band's career. During the song "Bad", Bono leapt down off the stage to embrace and dance with a fan, showing a television audience of millions the personal connection that Bono could make with audiences. In 1985, Rolling Stone magazine called U2 the "Band of the 80s," saying that "for a growing number of rock-and-roll fans, U2 have become the band that matters most, maybe even the only band that matters."

Motivated by friendships with Bob Dylan, Van Morrison, and Keith Richards, the band looked back to the roots of rock music, and Bono focused on his skills as a song and lyric writer. Realising "that U2 had no tradition", the band explored American blues, country, and gospel music. For their fifth album, the band wanted to build on The Unforgettable Fire's atmospherics, but instead of its out-of-focus tracks, they sought a harder-hitting sound within the strict discipline of conventional song structures. U2 interrupted their 1986 album sessions to serve as a headline act on Amnesty International's A Conspiracy of Hope tour, but rather than be a distraction, the tour added extra intensity and power to their new music. In his 1986 travels to San Salvador and Nicaragua, Bono saw the distress of peasants bullied in internal conflicts subject to American political intervention. This first-hand experience later became a central influence on the new music. The band wanted music with a sense of location, a 'cinematic' quality; the album's music and lyrics draw on imagery created by American writers whose works the band had been reading.

The Joshua Tree was released in March 1987. The album juxtaposes antipathy towards America against the band's deep fascination with the country, its open spaces, freedom, and what it stands for. It became the fastest-selling album in British chart history, and was number one for nine weeks in the United States. It won U2 their first two Grammy Awards. The album's first two singles, the "the rock & roll bolero" "With or Without You" and the rhythmic gospel "I Still Haven't Found What I'm Looking For", quickly went to number one in the U.S. U2 became the fourth rock band to be featured on the cover of Time magazine, which declared U2 "Rock's Hottest Ticket". The album brought U2 a new level of success and is cited by Rolling Stone as one of rock's greatest. The Joshua Tree Tour was the first during which the band played numerous stadium shows alongside smaller arena shows.

The documentary Rattle and Hum featured footage recorded from The Joshua Tree Tour, and the accompanying double album of the same name included nine studio tracks and six live U2 performances. Released in record stores and cinemas in October 1988, the album and film were intended as a tribute to American music. The film included tracks recorded at Sun Studios in Memphis and tracks performed with Bob Dylan and B. B. King. Despite a positive reception from fans, Rattle and Hum received mixed reviews from both film and music critics; one Rolling Stone editor spoke of the album's "excitement", another described it as "bombastic and misguided". The film's director, Phil Joanou, described it as "an overly pretentious look at U2". Most of the album's new material was played on 1989's Lovetown Tour, which primarily consisted of shows in Australia and Europe. With a sense of musical stagnation, Bono announced at an end-of-decade concert that U2 had come to the end of an era and had to "...go away and just dream it all up again".

In November 1991, U2 released their seventh studio album, Achtung Baby. Stung by criticism of Rattle and Hum, the band made a calculated change in musical and thematic direction, their most dramatic since The Unforgettable Fire. Sonically, Achtung Baby incorporated dance, industrial, and alternative rock influences of the time and the band referred to the album as the sound of "four men chopping down the Joshua Tree". Thematically, it was a more inward-looking and personal record; it was darker, yet at times more flippant, than the band's previous work. Commercially and critically, it has been one of the band's most successful albums and a crucial part of the band's early 1990s reinvention. Like The Joshua Tree, it is cited by Rolling Stone as one of rock's greatest.

The band initially worked on Achtung Baby in East Berlin, seeking inspiration and renewal on the eve of German reunification. Daniel Lanois produced the album with assistance from Brian Eno. In the Berlin sessions, conflict arose within the band over the quality of material and musical direction. While Adam and Larry preferred a sound similar to U2's previous work, Bono and The Edge were inspired by alternative and European dance music and advocated a change. Weeks of slow progress, arguments, and tension subsided when the band rallied around a chord progression The Edge had written, creating the song "One".
The Zoo TV Tour of 1992–1993 was a multimedia event, and showcased an extravagant but intentionally bewildering array of hundreds of video screens, upside-down flying Trabant cars, mock transmission towers, satellite TV links, subliminal messages, and Bono's over-the-top stage characters such as "The Fly", "Mirror-Ball Man", and "(Mister) MacPhisto". The extravagant shows were intentionally in contrast to the austere staging of previous U2 tours, and mocked the excesses of rock and roll by appearing to embrace these very excesses. The shows were, in part, U2's way to represent the pervasive nature of cable television and its blurring of news, entertainment, and home shopping. Prank phone calls were made to President Bush, the United Nations, and others. Live satellite uplinks to war-torn Sarajevo caused controversy.

Quickly recorded and released during a break in the Zoo TV tour in mid-1993, the Zooropa album continued many of the themes from Achtung Baby and the Zoo TV tour. Initially intended as an EP, the band expanded Zooropa into a full-length LP album. It was an even greater departure from the style of their earlier recordings, incorporating techno influences and other electronic effects. In keeping with this intentional departure from their previous style, Bono stepped down from the mic for the final track on Zooropa, and invited Johnny Cash to perform "The Wanderer".

Most of the songs were played at least once during the 1993 leg of the tour, which extended through Europe, Australia, New Zealand and Japan; half the album's tracks became fixtures in the set.

In 1995, U2 released an experimental album called Original Soundtracks 1. Brian Eno, producer of three previous U2 albums, contributed as a full partner, including writing and performing. For this reason, and due to the record's highly experimental nature, the band chose to release it under the moniker "Passengers" to distinguish it from U2's conventional albums. It was commercially unnoticed by U2 standards and it received generally poor reviews. However, the single "Miss Sarajevo" featuring Luciano Pavarotti, and which Bono cites as one of his favourite U2 songs, was a hit.
On 1997's Pop, U2 continued experimenting; Tape loops, programming, rhythm sequencing, and sampling provided much of the album with heavy, funky dance rhythms. Released in March, the album debuted at number one in 35 countries, and drew mainly positive reviews. Rolling Stone, for example, stated that U2 had "defied the odds and made some of the greatest music of their lives." Others felt that the album was a major disappointment and sales were poor compared to previous U2 releases. The band was hurried into completing the album in time for the impending pre-booked tour, and Bono admitted that the album "didn't communicate the way it was intended to".
The subsequent tour, PopMart, commenced in April 1997. Like Zoo TV, it featured advertising influences and was intended to send a sarcastic message to those accusing U2 of commercialism. The stage included a 100-foot (30 m) tall golden yellow arch (reminiscent of the McDonald's logo), a 150-foot (46 m) long video screen, and a 40-foot (12 m) tall mirrorball lemon. U2's "big shtick" failed, however, to satisfy many who were seemingly confused by the band's new kitsch image and elaborate sets. The late delivery of Pop meant rehearsal time was severely reduced, and performances in early shows suffered. A highlight of the tour was a concert in Sarajevo where U2 were the first major group to perform following the Bosnian War. Larry Mullen, Jr. described the concert as "an experience I will never forget for the rest of my life, and if I had to spend 20 years in the band just to play that show, and have done that, I think it would have been worthwhile." One month following the conclusion of the PopMart Tour, U2 appeared on the 200th episode of The Simpsons, "Trash of the Titans," in which Homer Simpson disrupted the band on stage during a PopMart concert.

Following the comparatively poor reception of Pop, U2 declared on a number of occasions that they were "reapplying for the job ... the best band in the world". Since 2000, the band has pursued a more traditional sound while maintaining influences from their previous musical explorations. All That You Can't Leave Behind was released in October 2000 and reunited the band with producers Brian Eno and Daniel Lanois. The album was considered by many of those not won over by the band's 1990s experimentation as a return to grace; Rolling Stone called it U2's "third masterpiece" alongside The Joshua Tree and Achtung Baby. The album debuted at number one in 22 countries and its worldwide hit single, "Beautiful Day" earned three Grammy Awards. The album's other singles, "Walk On", "Elevation", and "Stuck in a Moment You Can't Get Out Of" also won Grammy Awards.

For the Elevation Tour, U2 performed in a scaled-down setting, returning to arenas after nearly a decade of stadium productions. A heart-shaped stage and ramp permitted greater proximity to the audience. Following the September 11 attacks, the new album gained added resonance. In October, U2 performed a series of sold-out shows at Madison Square Garden in New York City. In later interviews, Bono and the Edge called these New York City shows among their most memorable and emotional performances. In early 2002, U2 performed during halftime of Super Bowl XXXVI.

The band's next studio album, How to Dismantle an Atomic Bomb, was released on 22 November 2004. Sonically, the band was looking for harder-hitting rock than All That You Can't Leave Behind. Thematically, Bono states that "A lot of the songs are paeans to naiveté, a rejection of knowingness." The first single, "Vertigo," was featured on a widely-aired television commercial for the Apple iPod, in conjunction with the release of a special edition U2 iPod and an iTunes U2 box set. The album debuted at number one in the U.S. where first week sales doubled that of All That You Can't Leave Behind and set a record for the band. Claiming it as a contender as one of U2's three best albums, Bono said, "There are no weak songs. But as an album, the whole isn't greater than the sum of its parts, and it fucking annoys me." Using a similar setup and stage design as the previous tour, the Vertigo Tour featured a set list that varied more across dates than any U2 tour since the Lovetown Tour, and included songs not played since the early 1980s. Like the Elevation Tour, the Vertigo Tour was a commercial success. The album and its singles won Grammy Awards in all eight categories in which U2 were nominated. In 2005, Bruce Springsteen inducted U2 into the Rock and Roll Hall of Fame.

In August 2006, the band transferred some of its operations to The Netherlands two months after Ireland capped its artists' tax exemption at €250,000. Since 2006, the band have been writing and recording new material, initially with Rick Rubin, and more recently with Brian Eno and Daniel Lanois. A 3-D concert film, U2 3D, filmed at nine concerts during the Latin America leg of the Vertigo Tour (Mexico, Chile, Argentina and Brazil), was released on 23 January 2008. On 31 March 2008, it was confirmed that U2 signed a 12 year deal with Live Nation worth an estimated $100 million (£50 million). The deal includes Live Nation controlling the band's merchandise, sponsoring and their official website. In a contractual agreement with Live Nation signed in March 2008, the parties agreed that the band would receive $25 million for 1.6 million shares of the company; as of December 17, 2008, those shares were only worth just over $6 million. It was reported on December 18, 2008 that Live Nation, honoring their financial commitment, bought back the shares at a loss of $19 million. The company hopes to recoup their losses with the release of and tour for U2's next album. The band is currently working on their twelfth album, No Line on the Horizon, to be released on March 2, 2008.

On 1 December 2008 U2 released a new song for Product Red, "I Believe in Father Christmas", a song originally written, recorded and released by Greg Lake.