The establishment of an institute of higher learning in Ereẓ Israel was first proposed by Hermann Schapira in 1884 at the Kattowitz Conference of the Ḥovevei Zion, and again at the first Zionist Congress in 1897. A few years later, a group of young Zionists were inspired by Chaim Weizmann , then a teacher at the University of Geneva, to make the foundation of such an institution a primary aim of the Zionist movement. The group, which included Martin Buber and Berthold Feiwel , brought the question before the Congress of 1901, and Herzl submitted a petition to the Ottoman sultan for permission to establish a university in Jerusalem.

The Congress of 1913 appointed a committee, including Weizmann and Judah L. Magnes of America, to execute the project, but the outbreak of World War I prevented action. While the war with the Turks was still being waged, Weizmann, who had come to Ereẓ Israel as head of the Zionist Commission after the issue of the Balfour Declaration , initiated the establishment of the university. On July 24, 1918, 12 foundation stones of the university were laid on Mount Scopus, north of the Old City of Jerusalem. This site, incomparable in beauty and impressiveness, had been acquired before the war by Isaac Goldberg from the estate of an English lawyer, Sir John Gray-Hill. The view commanded on one side the Holy City and Bethlehem, and on the other the rugged landscape of the Wilderness of Judea, the Jordan Valley, the Dead Sea, and the Mountains of Moab. Weizmann, the only speaker at the ceremony, concluded: "Here, out of the misery and the desolation of war, is being created the first germ of a new life.… In this university we have gone beyond restoration; we are creating during the war something which is to serve as symbol of a better future. In the university the wandering soul of Israel will reach its haven."

There was an interval of seven years before any faculty of the university could be opened. The first lecture was given in 1923 by Albert Einstein on his theory of relativity, and he spoke the first sentences in Hebrew, which was to be the language of teaching. He was dedicated to the university, and had accompanied Weizmann to the United States in 1921 to apprise American Jewry of its significance. It was decided that, before undergraduate teaching was initiated, work should be in postgraduate studies and scientific research. Three tiny institutes of research were opened, in Jewish studies, chemistry, and microbiology. The university was to develop in two directions: on the one hand, it should be the center where the Hebrew tradition would be molded in its original language and in the light of general humanities; on the other, it should be a center of research in the natural and medical sciences, which would help the regeneration of the land. The former development was the work of Magnes, who settled in Jerusalem in 1923, and devoted himself to bringing the university into being. Weizmann and committees in England and the United States launched the effort for scientific research. The university was opened on April 1, 1925, by Arthur Balfour , at an impressive ceremony attended by the High Commissioner, Sir Herbert Samuel , General Allenby, Chaim Weizmann, H.N. Bialik , Ahad Ha-Am , and Chief Rabbi Kook .

The university did not at that time receive any grant from the Government of Palestine; it was the financial responsibility of the Jews of the world. The supreme governing body included Jews eminent in public or academic life in many countries. Weizmann was chairman of the board, and Magnes chancellor – later president. The university grew quickly. Following the inauguration, new institutions were added: Jewish studies (1924); Oriental studies (1926); mathematics (1927); general humanities (1928): philosophy and history, geography and archaeology, classical literature, English, and other languages; physics (1930); and biological sciences (1931). Demand grew for regular courses of postgraduate studies, leading to a Master's degree. Two faculties were constituted: humanities, and science and mathematics. The first degrees were awarded in 1931. At this stage, however, the authorities were opposed to the opening of professional schools for doctors or lawyers: learning should be acquired for its own sake, and research was the main objective. About half the students were from Palestine, and half from abroad. Some of the teachers now appointed were graduates of the university.