The festival was founded in 1978 by Ollie Jennings and fellow students of NUI Galway. As such, it was an outgrowth of the Arts Society in the college. The society had staged some theatre shows and concerts, and when they left college they continued this tradition, with the help of an Arts Council grant of 1,000 pounds in 1978. The formation of the festival tied in with the creation of Macnas and the Druid theatre group. The original festival was held in Spring, usually early May, but switched to its current calendar position, the two weeks before the Galway Races due to exam pressure in the University and the availability of volunteers.
Over the years the Festival has developed a reputation to rival the near-hedonistic atmosphere which envelopes the city of Galway during those weeks. Highlights of the festival tend to be Macnas and Druid performances, two large local performance groups.