Founded in Chicago, Illinois in 1945, Mercury was a major force in jazz and blues, classical music, rock and roll and country music recordings and was in direct competition with major recording labels such as Columbia, Decca and RCA Victor.

The company released an enormous number of recordings under the Mercury label as well as its subsidiaries (including Blue Rock Records, Cumberland Records, Fontana Records, Limelight Records, Philips Records, Smash Records and Wing Records). In addition, they leased and purchased and redistributed material by independent labels. While the Mercury label covered a variety of recording styles from classical music to psychedelic rock, the subsidiaries tended to focus on their own specialised genres.

In 1961 the Dutch company, Philips, signed an exchange agreement with Mercury, and Philips subsequently bought Mercury and its subsidiary labels to expand its US base.

In 1962, Philips merged its record operations with Deutsche Grammophon to become PolyGram in the early 1970s. Under PolyGram, Mercury absorbed Casablanca Records and primarily became a rock/pop label.

In the late 1990s, PolyGram was bought by Seagrams, which then absorbed the company into its Universal Music Group. Under the reorganisation, Mercury Records was folded into the newly formed Island Def Jam Music Group. Mercury's pop roster was predominately taken over by Island Records, while its urban artists found a new home at Def Jam Records. Mercury's country subsidiary, Mercury Nashville, meanwhile is still an active imprint under IDJMG. Mercury also continues to operate as a fully functional label in the UK.