Originally an independent branch of Deutsche Grammophon, its name was first used, as an export label, in 1924. Deutsche Grammophon claimed the rights to the His Master's Voice (HMV) trademark for Germany, where HMV recordings were released under the Electrola trademark. In turn, DG records exported out of Germany were released on the Polydor label.

Deutsche Grammophon lost its rights to the HMV trademark to EMI as part of Germany's surrender terms at the end of World War II. Polydor became a popular music label in 1946 while Deutsche Grammophon became a classical music label. However, Polydor remained Deutsche Grammophon's export label, including classical music, in France and the Spanish-speaking world.

In 1972, Polydor merged with the Philips-owned Phonogram Records to create PolyGram in the US. The Polydor label continued run as a subsidiary label under the new company.

Into the 1980s, Polydor continued to do respectable business, in spite of becoming increasingly overshadowed by its PolyGram sister label Mercury Records.

By the early 1990s, Polydor began to underperform and became part of PLG (PolyGram Label Group) in order to cut costs. In 1994, Polydor Records and Atlas Records merged into one company (Polydor/Atlas) and was shifted over to operate under another PolyGram subsidiary, A&M Records. In 1995, Polydor/Atlas became simply Polydor Records again.

Polydor's fortunes continued to decline and, when Universal Music Group bought PolyGram in 1998, Polydor's US operations were dismantled, although its records continuing to be distributed domestically through A&M and its new partner Interscope Records.

Today, the Polydor Records name and logo is mostly used outside the UK on reissues of its 1960s and 1970s material, although the UK company continues to sign chart-topping acts such as Kaiser Chiefs. It also acts as the UK label for American-based acts like Eminem and Gwen Stefani.