The journal was founded after the merger of Burton's Gentleman's Magazine and Atkinson's Casket in 1840. Publishing short stories, critical reviews, and music as well as information on fashion, Graham intended the journal to reach all audiences including both men and women. He offered the high payment of $5 per page, successfully attracting some of the best-known writers of the day. It also became known for its engravings and artwork. Graham's may have been the first magazine in the United States to copyright each issue.
Edgar Allan Poe became the editor of Graham's in February 1841 and soon was publishing the harsh critical reviews for which he became known. It was also where he first published "The Murders in the Rue Morgue", now recognized as the first detective story. After Poe left the journal, his successor was Rufus Wilmot Griswold, a known enemy. Graham's later passed on being the first to publish "The Raven". Graham left his magazine for a time in 1848 and it eventually ceased in 1858.
In December of 1840, Graham had just acquired Burton's Gentleman's Magazine for $3,500, paying a dollar for each of its 3,500 subscribers, and merged it with another recently-purchased magazine, Atkinson's Casket, which only had 1500 subscribers.
Graham intended the magazine to be popular amongst both men and women, containing fashion, photographs, music, short stories and critical reviews. He also hoped to reach out to both mainstream audiences and those with more refined tastes. Graham was not a writer himself, other than a section at the back of each issue called "Graham's Small Talk", and so relied heavily on contributors. To that end, Graham made sure it was popular amongst writers as a well-paying journal; the $5 standard become known as a "Graham page". Other journals at the time were paying the standard rate of $1 per page. His attempt at attracting the best contributors worked: Contributors to the magazine included William Cullen Bryant, Nathaniel Hawthorne, James Russell Lowell, Christopher Pearse Cranch, Fitz-Greene Halleck, George D. Prentice, Alice and Phoebe Cary.
James Fenimore Cooper was reportedly the highest-paid contributor to Graham's, receiving $1,600 for the serial "The Islets of the Gulf, or Rose-Budd", later published as Jack Tier, or The Florida Reefs. He received another $1,000 for a series of biographies on distinguished naval commanders. Graham's at one point was advertised as having the most distinctive list of contributors ever achieved by any American magazine. Graham's boasted that many issues of his magazine cost $1,500 for "authorship" alone.
Graham's may have been the first magazine in America to copyright each issue. By March 1842, Graham's Magazine was issuing 40,000 copies. This boom was reflective of a changing market in American readership. John Sartain believed its success was due to the appeal of the engravings he provided for each issue. The Saturday Evening Post reported that the August 1841 issue of Graham's cost $1,300 for these "embellishments". The Post reported April 30, 1842: "It is doubtful, if engravings of equal beauty ever adorned an American work". Typical engravings in Graham's included bridges, happy maids, and scenes which focused on peaceful domestic life and promoted marriage. The editorial staff grew to include "two lady editors", Ann S. Stephens and E. C. Embury.
Poe had a decent relationship with Graham and took advantage of the editorial control he was granted. The magazine was the first to publish "The Murders in the Rue Morgue", "A Descent into the Maelström", "The Island of the Fay" and others. He also reviewed Charles Dickens's The Old Curiosity Shop, Nathaniel Hawthorne's Twice-Told Tales, and works by Henry Wadsworth Longfellow, Washington Irving and many others. He also further built up his reputation as a harsh literary critic, causing James Russell Lowell to suggest Poe sometimes mistook "his phial of prussic acid for his inkstand". With Graham's, Poe also launched his Literati of New York series, which purportedly analyzes the signatures of well-known figures in the New York scene, but which featured Poe taking pot-shots at their personalities. The Philadelphia Inquirer in October 1841 called Poe's article "the most singular, and at the same time, the most interesting article" in the magazine.
Poe left Graham's employ in April of 1842 but still made occasional contributions. In 1847, he voluntarily took a cut in the usual payment to $4 per page to cover a debt he owed to Graham.
Though he originally called his salary "liberal," Poe would later complain of his "nambypamby" payment of $800 per year when compared to Graham's alleged $25,000 in profit. A possibly apocryphal story is that Poe returned to the office in April 1842 after a brief illness to find Charles Peterson, another editor, sitting at his desk and performing his duties. Upset, he impulsively resigned on the spot. By then, however, he had already made a significant impact on Graham's. A year after Poe's departure, Philadelphia editor George Lippard said, "It was Mr. Poe that made Graham's Magazine what it was a year ago; it was his intellect that gave this now weak and flimsy periodical a tone of refinement and mental vigor".