The university has been developing and expending since its inception, which started with the enrolment of 57 science based students. Now. USM offers courses at undergraduate and postgraduate levels to approximately 20000 students. USM has also become a well known university locally and internationally. USM was founded after an agreement made on resolution approved by the Penang State Legislative Council in 1962, which suggested that a university college be established at the state. An area in Sungai Ara was identified and later the foundation stone was placed by the Prime Minister, Y.T.M Tunku Abdul Rahman Putra Al-Haj on the 7th of August 1967. In 1969, the University of Penang was established in response for the need for a larger campus with a more conductive enviroment, appropriate to the needs of the future of the country,

In April 1969, Professor Hamzah Sendut was elected the Vice-Chancellor. Two months later a group of 57 students was accepted to begin their studies. Since the area of Sungai Ara could not be developed as fast as required, the group was placed at the Malayan Teacher's Training College at Bukit Gelugor on loan from the Education Ministry. In 1971, the campus which was originally planned to be situated in Sungai Ara moved to its present site, Minden, a beaytiful location with an are measuring 500 acres. The green and hilly scenery facing the sea is truly captivating.

Since its beginning, USM has implemented a school system, as opposed to the traditional faculty system. What is unique about this system is that each school could fulfill the needs of more focused degree in the chosen area of study and at the same time, student could have the opportunity to explore other areas of study offered by another school. This interdisciplinary approach ensures that USM, the first in the country to adopt this system, would produce trained, multi skilled graduate.