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In 1833 Eugène François Vidocq, a French soldier, criminal and privateer, founded the first known private detective agency, "Le Bureau des Renseignements Universels pour le commerce et l'Industrie" ("The Office of Universal Information For Commerce and Industry") and hired ex-convicts. Official law enforcement tried many times to shut it down. In 1842 police arrested him in suspicion of unlawful imprisonment and taking money on false pretences after he had solved an embezzlement case. Vidocq later suspected that it had been a set-up. He was sentenced for five years with a 3,000-franc fine but the Court of Appeals released him. Vidocq is credited with having introduced record-keeping, criminology and ballistics to criminal investigation. He made the first plaster casts of shoe impressions. He created indelible ink and unalterable bond paper with his printing company. His form of anthropometrics is still partially used by French police. He is also credited for philanthropic pursuits – he claimed he never informed on anyone who had stolen for real need.

After Vidocq, the industry was born. Much of what private Detective / Investigators did in the early days was to act as the police in matters that their clients felt the police were not equipped for or willing to do. A larger role for this new private investigative industry was to assist companies in labour disputes. Some early private Detective / Investigators provided armed guards to act as a private militia.

In the United Kingdom, Charles Frederick Field set up an enquiry office upon his retirement from the Metropolitan Police in 1852. Field became a friend of Charles Dickens and the latter wrote articles about him. In 1862 one of his employees, the Hungarian Ignatius Paul Pollaky, left him and set up a rival agency. Although little remembered today, Pollaky's fame at the time was such that he was mentioned in various books of the 1870s and immortalized as "Paddington" Pollaky for his "keen penetration" in the 1881 comic opera, Patience.

In the United States, the Pinkerton National Detective Agency was a private detective agency established in 1850 by Allan Pinkerton. Pinkerton had become famous when he foiled a plot to assassinate then President-Elect Abraham Lincoln. Pinkerton's agents performed services which ranged from undercover investigations and detection of crimes to plant protection and armed security. It is sometimes claimed, probably with exaggeration, that at the height of its existence the Pinkerton National Detective Agency employed more agents than the United States Army. Allan Pinkerton hired Kate Warne in 1856 as a private detective, making her the first female private detective in America.

During the union unrest in the US in the late 19th century, companies sometimes hired operatives and armed guards from the Pinkertons. In the aftermath of the Homestead Riot, several states passed so-called "anti-Pinkerton" laws restricting the importation of private security guards during union strikes. The federal Anti-Pinkerton Act of 1893 continues to prohibit an "individual employed by the Pinkerton Detective Agency, or similar organization" from being employed by "the Government of the United States or the government of the District of Columbia." Pinkerton agents were also hired to track western outlaws Jesse James, the Reno brothers, and the Wild Bunch, including Butch Cassidy and the Sundance Kid. The Pinkerton agency's logo, an eye embellished with the words "We Never Sleep," inspired the term "private eye."

It was not until the prosperity of the 1920s that the private investigator became a person accessible to the average American. With the wealth of the 1920s and the expanding of the middle class came the need of middle America for private Detective / Investigators. Since then, the private detective industry has grown with the changing needs of the public. Social issues like infidelity and unionization have impacted the industry and created new types of work, as has the need for insurance and, with it, insurance fraud, criminal defenceinvestigations and the invention of low-cost listening devices.

Increasingly, modern PIs prefer to be known as "professional Detective / Investigators" or Licensed Private Detective / Investigators (LPI's) rather than "private Detective / Investigators" or "private detectives". This is a response to the image that is sometimes attributed to the profession and an effort to establish and demonstrate the industry to be a proper and respectable profession.However, in 2009 a Toronto Star journalist obtained a private investigator's license in Ontario with no training, and reported that other Ontarians had done the same.

A handful of very skilled private detectives/investigators work with defense attorneys on capital punishment and criminal defense cases. Many work for insurance companies to investigate suspicious claims. Before the advent of no-fault divorce, many private Detective / Investigators were hired to search out evidence of adultery or other conduct within marriage to establish grounds for a divorce. Despite the lack of legal necessity for such evidence in many jurisdictions, according to press reports collecting evidence of adultery or other "bad behaviour" by spouses and partners is still one of the most profitable activities Detective / Investigators undertake, as the stakes being fought over now are child custody, alimony, or marital property disputes.

Private Detective / Investigators can also be used to perform due diligence for an investor who may be considering investing money with an investment group, fund manager or other high-risk business or investment venture. This could serve to help the prospective investor avoid being the victim of a fraud or Ponzi scheme. By hiring a licensed and experienced investigator, they could unearth information that the investment is risky and or that the investor has suspicious red flags in his or her background. This is called investigative due diligence, and is becoming much more prevalent in the 21st century.

PIs also engage in a large variety of work that is not usually associated with the industry in the mind of the public. For example, many PIs are involved in process serving, the personal delivery of summons, subpoenas and other legal documents to parties in a legal case. The tracing of absconding debtors can also form a large part of a PI's work load. Many agencies specialize in a particular field of expertise.

This type of niche service is typically conducted by those with backgrounds in intelligence/counterintelligence, executive protection, and a small number from law enforcement entities whose duties included the covert installation of eavesdropping devices as a tool in organized crime, terrorism and narco-trafficking investigations.

Other PIs, also known as Corporate Detective / Investigators, specialize in corporate matters, including anti-fraud work, loss prevention, internal investigations of employee misconduct (such as EEO violations and sexual harassment), the protection of intellectual property and trade secrets, anti-piracy, copyright infringement investigations, due diligence investigations and computer forensics work.

An undercover investigator, undercover detective, or undercover agent is a person who conducts investigations of suspected or confirmed criminal activity while impersonating a disinterested third party. Undercover Detective / Investigators often infiltrate a suspected insurgent group, posing as a person interested in purchasing illegal goods or services with the ultimate aim of obtaining information about their assigned target.

Many undercover Detective / Investigators carry hidden cameras and recorders strapped to their bodies to help them document their investigations. The period of the investigation could last for several months or, in some extreme cases, years. Due to the dangerous nature of the job, their real identities are kept secret throughout their active careers.

Many jurisdictions require PIs to be licensed, and they may or may not carry firearms depending on local laws. Some are former police officers, some are former law enforcement agents, some are former spies, some are former military, some used to work for a private military company, and some are former bodyguards and security guards, although many are not. While PIs may investigate criminal matters, most do not have police powers, and as such they have only the powers of citizen's arrest and detainment that any other citizen has. They are expected to keep detailed notes and to be prepared to testify in court regarding any of their observations on behalf of their clients. Great care is required to remain within the scope of the law, otherwise the investigator may face criminal charges. Irregular hours may also be required when performing surveillance work.