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Starting in the mid-19th century, the Washington area had been served by a variety of private bus lines and streetcar services, including extensions of Northern Virginia trolleys. Over time, most were absorbed into the Capital Transit Company, formed on December 1, 1933, by the amalgamation of the Washington Railway, Capital Traction, and Washington Rapid Transit. Financier Louis Wolfson acquired the company in 1949 but had his franchise revoked in 1955 amidst a crippling strike. Congress then awarded a 20-year concession to O. Roy Chalk on the condition that he replace the city's remaining streetcars with buses by 1963. The company was thereafter known as DC Transit.
In that same year, the Mass Transportation Survey attempted to forecast both freeway and mass transit systems sufficient to meet the needs of the Washington area in the year 1980. In 1959 the study's final report called for the construction of two rapid transit subway lines in downtown Washington. Congress responded to the report by enacting the National Capital Transportation Act of 1960 to coordinate future transportation planning for the area. The act created a new federal agency called the National Capital Transportation Agency (NCTA). However, the 1959 report also called for extensive freeway construction within the District of Columbia. Residents successfully lobbied for a moratorium on freeway construction in what became part of a movement called the "freeway revolts."
The NCTA's November 1962 Transportation in the National Capital Region report included a proposal for an 89-mile (143 km), $793 million rail system. The total cost of the proposed highway and rail system was less than the 1959 plan due to the elimination of controversial freeways. The plan was supported by President Kennedy, but opposed by highway advocates in Congress who reduced the rail system to only 23英里（37） within the District of Columbia. However, that proposal was defeated in Congress shortly after President Kennedy's death. The Urban Mass Transportation Act of 1964 passed Congress, which promised 66% federal funding for urban mass transportation projects. Encouraged by the new act, the NCTA recommended the formation of a private entity or a multi-state authority to operate the system using more non-federal funds. On September 8, 1965, President Johnson signed the National Capital Transportation Act of 1965 approving the construction of a 25-英里（40-） rapid transit system.
The NCTA negotiated with Virginia, Maryland and the District of Columbia for the formation of a new regional entity. The authority was created by an interstate compact, a special type of contract or agreement between one or more states. Pursuant to the Compact Clause of the U.S. Constitution, any such compact must be approved by Congress. After the Washington Metropolitan Area Transit Authority Compact was approved by the Maryland General Assembly in 1965, and passed through the Virginia General Assembly and Congress in 1966, WMATA was founded on February 20, 1967.
As a government agency, the compact grants WMATA sovereign immunity by all three jurisdictions in which it operates, and except for certain limited exceptions, the authority cannot be successfully sued unless it waives immunity. Under the provisions of the compact, the authority is legally incorporated in the District of Columbia, where WMATA maintains its headquarters.