The cheesesteak was developed in the early 20th century "by combining frizzled beef, onions, and cheese in a small loaf of bread," according to a 1987 exhibition catalog published by the Library Company of Philadelphia and the Historical Society of Pennsylvania.

Philadelphians Pat and Harry Olivieri are often credited with inventing the sandwich by serving chopped steak on an Italian roll in the early 1930s. The exact story behind its creation is debated, but in some accounts, Pat and Harry Olivieri originally owned a hot dog stand, and on one occasion, decided to make a new sandwich using chopped beef and grilled onions. While Pat was eating the sandwich, a cab driver stopped by and was interested in it, so he requested one for himself. After eating it, the cab driver suggested that Olivieri quit making hot dogs and instead focus on the new sandwich. They began selling this variation of steak sandwiches at their hot dog stand near south Philadelphia's Italian Market. They became so popular that Pat opened up his own restaurant which still operates today as Pat's King of Steaks. The sandwich was originally prepared without cheese; Olivieri claims provolone cheese was first added by Joe "Cocky Joe" Lorenza, a manager at the Ridge Avenue location."

Steak & Cheese have become popular in restaurants, cafeterias and food carts throughout the world with many locations being independently owned, family-run businesses.Variations of cheesesteaks are now common in several fast food chains. Versions of the sandwich can also be found in locations ranging from bars to high-end restaurants. Many establishments outside of Philadelphia also refer them specifically as "Philly cheesesteaks." or "Philly steak and cheese"