The chain, originally known as Fashion 21, was founded in Los Angeles, California in 1984 by South Korean Dong-Won Chang and his wife, Jin Sook. The first store opened on April 21, 1984. It was located at 5637 N. Figueroa St. in the Highland Park district of Los Angeles. The store was only 900 square feet (84 m2). It is still in operation and bears the chain's original name. Trendy designs seen in South Korea were sold and targeted to the Los Angeles Korean American Community. However, people from many other ethnicities began noticing the fashion forward designs, and the store became increasingly popular. By the end of the first year, sales had risen from $35,000 to $700,000. Fashion 21 eventually expanded at the rate of a new store every six months and changed the Fashion 21 brand name to Forever 21.

In 1989, Forever 21 opened its 11th store and first store located in a mall, at the Panorama Mall which is in Panorama City, CA. Forever 21 increased its presence by expanding the average size to 5,000 square feet (460 m2) per store. Since then, Forever 21 has been running specialty stores in major mall locations nationwide. In 1995, the company expanded their store in Miami's Mall of the Americas, this location was the first store outside of California. Adding new stores every six months, Forever 21 had reached a total of 40 stores by 1997.

Creating its own prototype store in Northridge Fashion Center, Forever 21 has employed its proprietary design concepts to all its stores since then. By this time Forever 21 also increased its average size to 9,000 square feet (840 m2) per store in prime spots of top tier malls.

The first European store is due to open in Dublin, Ireland, in the Jervis Shopping Centre on November 15, 2010. The store will occupy 70,000 square feet over the ground, upper ground and first floor levels.

Stores in the United Kingdom are opening late 2010 with the first at Birmingham's Bullring and second at London's Westfield Stratford City. Going up against established stores such as H&M, New Look and Primark.

Forever 21 has signed a lease for a 33,000 square foot store in Charleston, South Carolina, in a former Saks Location. It is scheduled to open late 2010.

The Forever 21 Retail Inc. owns and operates numerous stores in different formats. The stores are:

XXI Forever is the name for the newest flagship stores throughout the country. Latest stores openings are XXI Forever, Forever21 still has openings of the original store, but as a big box, including the 21Men line. Not only XXI stores carry the 21Men clothing line, but also the new store openings of Forever21 do as well.

Plans were in the works to open a new 90,000 square feet (8,400 m2) Forever 21 in Manhattan, in Times Square, in the space formerly occupied by the Virgin Megastore, in addition to some adjoining space. The store opened at 10am on June 25, 2010.

In November 2001, factory workers producing clothing for the company called for a store boycott until working conditions and payroll improved. The lawsuit was dropped when Forever 21 paid the workers' back wages. The matter was settled out of court and the company, which admitted no wrongdoing, agreed to take steps to ensure that its garments were not made in sweatshops. The store later became the subject of the documentary Made in L.A. which focused on the awareness campaign organized by the store's garment factory workers. In 2004, under pressure from PETA, Forever 21 agreed to stop selling clothing made with animal fur.