The school was founded on July 4, 1881, as the Tuskegee Normal School for Colored Teachers. This was a result of an agreement made during the 1880 elections in Macon County between a former Confederate Colonel, W.F. Foster, who was a candidate for re-election to the Alabama Senate, and a local Black Leader, Lewis Adams. W.F. Foster propositioned that if Adams could successfully persuade the Black constituents to vote for Foster, if elected, Foster would push the state of Alabama to establish a school for Black people in the county. At the time the majority of Macon County population was Black, thus Black constituents had political power. Adams succeeded and Foster followed through with the school.[citation needed] The school became a part of the expansion of higher education for blacks in the former Confederate states following the American Civil War, with many schools founded by the northern American Missionary Association. A teachers' school was the dream of Lewis Adams, a former slave, and George W. Campbell, a banker, merchant, and former slaveholder, who shared a commitment to the education of blacks. Despite lacking formal education, Adams could read, write, and speak several languages. He was an experienced tinsmith, harness-maker, and shoemaker and was a Prince Hall Freemason, an acknowledged leader of the African-American community in Macon County, Alabama.

Adams and Campbell had secured $2,000 from the State of Alabama for teachers' salaries but nothing for land, buildings, or equipment. Adams, Campbell (replacing Thomas Dryer, who died after his appointment), and M. B. Swanson formed Tuskegee's first board of commissioners. Campbell wrote to the Hampton Institute in Virginia, requesting the recommendation of a teacher for their new school. Samuel C. Armstrong, the Hampton principal and a former Union general, recommended 25-year-old Booker T. Washington, an alumnus and teacher at Hampton.

Original campus buildings on the Miller plantation, 1882

As the newly hired principal in Tuskegee, Booker T. Washington began classes for his new school in a rundown church and shanty. The following year (1882), he purchased a former plantation of 100 acres in size. In 1973 the Tuskegee Institute, now Tuskegee University, did an oral history interview with Annie Lou "Bama" Miller. In that interview she indicated that her grandmother sold the original 100 acres of land to Booker T. Washington. That oral history interview is located at the Tuskegee University archives. The earliest campus buildings were constructed on that property, usually by students as part of their work-study. By the start of the 20th century, the Tuskegee Institute occupied nearly 2,300 acres.

Based on his experience at the Hampton Institute, Washington intended to train students in skills, morals, and religious life, in addition to academic subjects. Washington urged the teachers he trained "to return to the plantation districts and show the people there how to put new energy and new ideas into farming as well as into the intellectual and moral and religious life of the people. "Washington's second wife Olivia A. Davidson, was instrumental to the success and helped raise funds for the school.

Gradually, a rural extension program was developed, to take progressive ideas and training to those who could not come to the campus. Tuskegee alumni founded smaller schools and colleges throughout the South; they continued to emphasize teacher training.