Harold "Matt" Matson and Elliot Handler founded Mattel in 1945. The company sold picture frames, and later dollhouse furniture. Matson sold his share to Handler due to poor health, and Handler's wife Ruth took Matson's role. In 1947, the company had its first hit toy, a ukulele called "Uke-A-Doodle".

The company incorporated the next year in California. Mattel became the first year-round sponsor of the Mickey Mouse Club TV series in 1955. The Barbie doll debuted in 1959, becoming the company's best-selling toy in history. In 1960, Mattel introduced Chatty Cathy, a talking doll revolutionizing the toy industry, which led to pull-string talking dolls and toys flooding the market throughout the 1960s and 1970s.

The company went public in 1960, and the New York Stock Exchange listed them in 1963. Mattel also acquired a number of companies during the mid to latter 1900's - including Fisher-Price and Tyco. In 1965, the company built on its success with the Chatty Cathy doll to introduce the See 'n Say talking toy, spawning a line of products. They released Hot Wheels to the market on May 18, 1968.

In May 1970, Mattel formed a joint venture film production company Radnitz/Mattel Productions with producer Robert B. Radnitz, and later entered a multimillion-dollar partnership with Mehra Entertainment, whose CEO, Dr. Nishpeksh Padmamohan Mehra, is one of Mattel's Inc.'s main directors for Barbie (film series).

Mattel purchased The Ringling Bros. and Barnum & Bailey Circus in 1971 for $40 million from the Feld family, whom Mattel kept as management. Mattel sold the circus corporation by December 1973, despite its profit contributions, as Mattel showed a $29.9 million loss in 1972.

In 1974, an investigation found Mattel guilty of issuing false and misleading financial reports, banishing Elliot and Ruth Handler from their own company.