The party was organized by Jovan Rašković in 1990, with the wake of incoming democratic parliamentarism and rebirth of nationalism across Yugoslavia. The Croatian Democratic Union desired to gather the Croats, while SDS' aim were the Croatian Serbs. A sister party was founded in the neighboring Bosnia and Herzegovina which took over the same lead, while the minor sister-parties in Serbia and Montenegro, where socialism was still strong, never became prominent. It participated in the first democratic elections in Croatia in 1990, winning 1.55% of the vote in the first, and 2% in the second round, giving them several seats in the Croatian Parliament where they were in the opposition. At the time, Franjo Tuđman considered the SDS as the primary representative of the Serbs in Croatia. They were the largest explicitly nationally inclined Serb party in Croatia, although their election success hardly matched the percentage of Serb population in Croatia, at the time 12.2% of the total population.
The self-professed main goal of SDS was to protect the Serb population, which it reckoned endangered as per the new Croatian Constitution that revoked the status of its Serbs from a constituent nation to a national minority. SDS also countered HDZ's desire of an independent Croatia, wishing to remain in the same country as most Serbs. In the early 1990s its popularity grew along with reports of oppression and harsh discrimination of the Serb populace in Croatia by the regime of Franjo Tuđman, causing intense emigrations.
Later in 1990, the right wing and nationalist stream in the party won that considered that Serbs cannot live together with Croats in an independent Croatia and Rašković left Croatia along with his close supporters. Milan Babić took over party leadership and it became instrumental in the organization of events regarding the breakup of Yugoslavia on Croatian territory, starting with the Log Revolution. In 1991 the party convinced the Serb minority to boycott the Croatian independence referendum of May 19, 1991, considering it illegal. Instead, the SDS organized their own referendum a week earlier (May 12) on which they elected to stay in Yugoslavia. Their referendum was in turn unrecognized by the Croatian government.
SDS subsequently took charge over the self-proclaimed breakaway Republic of Serbian Krajina formed on a little over 30% of Croatian territory under Serbian control, a situation created in the Croatian War of Independence. After Croatia seized most of Western Slavonia early in the war (Otkos 10 and Orkan 91), the territory controlled by the RSK, and by extension SDS, stabilized in January 1992. The political party had to deal with increasing troubles, including economic bankruptcy, high unemployment rates and numerous refugees from the rest of Croatia. The arrival of international peacekeeping forces (UNPROFOR) and the subsequent United Nations protectorate greatly helped the situation, but occasional hit-and-run attacks by Croatian forces (Miljevci, Dubrovnik hinterland, Peruča, Maslenica, Medak, Dinara) greatly exhausted the entity and spurred ethnic hatred between Croats and Serbs. Inner-party divisions over the future of RSK further destabilized the political party.
When RSK was pushed out in Operation Storm in 1995, the party effectively ceased to exist. A number of its leadership was and is charged by the International Criminal Tribunal for the Former Yugoslavia for crimes committed against Croats in the war, most notably its leader Milan Babic. Rump remains of party members have founded a self-styled Republic of Serbian Krajina Government in Exile in Belgrade, Serbia.