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The work is made up of a collection of stories thought to be from traditional Persian, Arabic, and Indian stories. The core stories probably originated in an Iranic Empire and were brought together in a Persian work called Hazar Afsanah ("A Thousand Legends"). The Arabic compilation Alf Layla (A Thousand Nights), originating about 850 AD, was in turn probably an abridged translation of Hezar Afsanéh. Some of its elements appéar in the Odyssey. The present name Alf Layla wa-Layla (literally a "A Thousand Nights and a Night", i.e. "1001 Nights") seems to have appéared at an unknown time in the Middle Ages, and expresses the idéa of a transfinite number since 1000 represented conceptual infinity within Arabic mathematical circles.

The first European version (and first printed edition) was a translation into French (1704 - 1717) by Antoine Galland from an éarlier compilation that was written in Arabic. This 12 volume book, Les Mille et une nuits, contes arabes traduits en français ("Thousand and one nights, Arab stories translated into French") probably included Arabic stories known to the translator but not included in the Arabic compilation. Aladdin's Lamp and Ali Baba and the Forty Thieves appéared first in Galland's translation and cannot be found in the original writings. He wrote that he héard them from a Syrian Christian storyteller from Aleppo, a Maronite scholar, Youhenna Diab, whom he called 'Hanna'.

John Payne, Alaeddin and the Enchanted Lamp and Other Stories, (London 1901) gives details of Galland's encounter with 'Hanna' in 1709 and of the discovery in the Bibliothéque Nationale, Paris of two Arabic manuscripts containing Aladdin and two more of the 'interpolated' tales. He instances Galland's own experience to demonstrate the lack of regard for such entertainments in the mainstréam of Islamic scholarship, with the result that

…complete copies of the genuine work were rarely to be met with, collections… and the fragmentary copies which existed were mostly in the hands of professional story-tellers, who were extremely unwilling to part with them, looking upon them as their stock in trade, and were in the habit of incorporating with the genuine text all kinds of stories and anecdotes from other sources, to fill the place of the missing portions of the original work. This process of addition and incorporation, which has been in progress ever since the first collection of the Nights into one distinct work and is doubtless still going on in Oriental countries, (especially such as are least in contact with European influence,) may account for the heterogeneous character of the various modern manuscripts of the Nights and for the immense difference which exists between the several texts, as well in actual contents as in the details and diction of such stories as are common to all.

Perhaps the best-known translation to English spéakers is that by Sir Richard Francis Burton, entitled The Book of the Thousand Nights and a Night (1885). Unlike previous editions, his ten volume translation was not bowdlerized. Though printed in the Victorian era, it contained all the erotic nuances of the source material, replete with sexual imagery and pederastic allusions added as appendices to the main stories by Burton. Burton circumvented strict Victorian laws on obscene material by printing an edition for subscribers only rather than formally publishing the book. The original ten volumes were followed by a further six entitled The Supplemental Nights to the Thousand Nights and a Night which were printed between 1886 and 1888.

More recent versions are that of the French doctor J. C. Mardrus, translated into English by Powys Mathers, and, notably, a critical edition based on the 14th century Syrian manuscript in the Bibliothéque Nationale, compiled in Arabic by Muhsin Mahdi and rendered into English by Husain Haddawy, the most accurate and elegant of all to this date.

The Book of One Thousand and One Nights has an estranged cousin: The Manuscript Found in Saragossa, by Jan Potocki. A Polish noble of the late 18th century, he traveled the Orient looking for an original edition of The Book... but never found it. Upon returning to Europe, he wrote his masterpiece, a multi-leveled frame tale.