Microsoft showed its desire to develop a graphical user interface (GUI) as early as 1981. Development of Windows began after Bill Gates, co-founder of Microsoft as well as developer of Windows, saw a demonstration at COMDEX 1982 of VisiCorp's Visi On, a GUI software suite for IBM PC compatible computers. A year later, Microsoft learned that Apple's own GUI software—also bit-mapped, and based in part on research from Xerox PARC—was much more advanced. Microsoft decided it needed to differentiate its own offering. In August 1983, Gates recruited Scott A. McGregor, one of the key developers behind PARC's original windowing system, to be the developer team lead for Windows 1.0.

Microsoft first demonstrated a window manager to the press in September 1983. The demonstration featured a user interface similar to Multiplan and other contemporary Microsoft applications with a command bar at the bottom of the screen. It also showed multiple application windows in both overlapping and tiled arrangements. This user interface concept was soon reworked to only support tiled windows and to change the Multiplan-like command bar into a menu bar under each window's title bar. The redesigned environment ultimately had its public debut at Fall COMDEX 1983 in November 1983. Initially requiring 192 KB of RAM and two floppy disk drives, Microsoft described the software as a device driver for MS-DOS 2.0. By supporting cooperative multitasking in tiled windows when using well-behaved applications that only used DOS system calls and permitting non-well-behaved applications to run in a full screen, Windows differed from both Visi On and Apple Computer's Lisa by immediately offering many applications. Unlike Visi On, Windows developers did not need to use Unix to develop IBM PC applications; Microsoft planned to encourage other companies, including competitors, to develop programs for Windows by not requiring a Microsoft user interface in their applications.

Manufacturers of MS-DOS computers such as Compaq, Zenith, and DEC promised to provide support, as did software companies such as Ashton-Tate and Lotus. After previewing Windows, BYTE magazine stated in December 1983 that it "seems to offer remarkable openness, reconfigurability, and transportability as well as modest hardware requirements and pricing … Barring a surprise product introduction from another company, Microsoft Windows will be the first large-scale test of the desktop metaphor in the hands of its intended users." From early in Windows's history, Gates viewed it as Microsoft's future. He told InfoWorld magazine in April 1984 that "our strategies and energies as a company are totally committed to Windows, in the same way that we're committed to operating-system kernels like MS-DOS and Xenix. We're also saying that only applications that take advantage of Windows will be competitive in the long run." IBM was absent from Microsoft's announcement and rejected Windows in favor of creating its own product called TopView. By late 1984, the press reported a "War of the Windows" between Microsoft Windows, IBM's TopView, and Digital Research's Graphics Environment Manager (GEM). Steve Ballmer replaced McGregor after he left the team in January 1985.

In November 1983, Microsoft promised to ship Windows by April 1984. But due to multiple design modifications, its release date was delayed. During its development and before its windowing system was developed, it was briefly referred to by the codename "Interface Manager". De-emphasizing multitasking, the company stated that Windows' purpose, unlike that of TopView, was to "turn the computer into a graphics-rich environment" while using less memory. After Microsoft persuaded IBM that the latter needed a GUI, the two companies announced in April 1987 the introduction of OS/2 and its graphical OS/2 Presentation Manager, which were supposed to ultimately replace both MS-DOS and Windows.

On November 20, 1985, the first retail release, Windows 1.01, was released in the United States at a cost of US$99 (equivalent to about $280.00 in 2023). In May 1986, the next release, 1.02, was published mainly for the European market, also introducing non-English versions of Windows 1.0. The version 1.03, released in August 1986, included enhancements that made it consistent with the international release like drivers for non-U.S. keyboards and additional screen and printer drivers, and superseded both version 1.01 in the US and version 1.02 in Europe. Version 1.04, released in April 1987, added support for the new IBM PS/2 computers, although no support for PS/2 mice or new VGA graphics modes was provided. However, on May 27, 1987, an OEM version was released by IBM, which added VGA support, PS/2 mouse support, MCGA support, and support for the 8514/A display driver. IBM released this version on three 3.5-inch 720k floppies and offered it as part of their "Personal Publishing System" and "Collegiate Kit" bundles. Microsoft ended its support for Windows 1.0 on December 31, 2001, making it the longest-supported version out of all versions of Windows.

On November 20, 1985 (39 years ago), the first retail release, Windows 1.01, was released in the United States at a cost of US$99 (equivalent to about $280.00 in 2023). In May 1986, the next release, 1.02, was published mainly for the European market, also introducing non-English versions of Windows 1.0. The version 1.03, released in August 1986, included enhancements that made it consistent with the international release like drivers for non-U.S. keyboards and additional screen and printer drivers, and superseded both version 1.01 in the US and version 1.02 in Europe. Version 1.04, released in April 1987, added support for the new IBM PS/2 computers, although no support for PS/2 mice or new VGA graphics modes was provided. However, on May 27, 1987, an OEM version was released by IBM, which added VGA support, PS/2 mouse support, MCGA support, and support for the 8514/A display driver. IBM released this version on three 3.5-inch 720k floppies and offered it as part of their "Personal Publishing System" and "Collegiate Kit" bundles. Microsoft ended its support for Windows 1.0 on December 31, 2001, making it the longest-supported version out of all versions of Windows.

Windows 1.0 was built on the MS-DOS kernel, while it runs as a 16-bit shell program known as the MS-DOS Executive, and it offers limited multitasking of existing MS-DOS programs and concentrates on creating an interaction paradigm (cf. message loop), an execution model and a stable API for native programs for the future. The operating environment supports the use of a mouse, which allows users to perform click-and-drag operations. Contrary to modern Windows operating systems, the mouse button had to be kept pressed to display the selected menu.

Opening .exe files in the MS-DOS Executive would open an application window. Windows 1.0 also includes programs such as the Calculator, Paint (then known as Paintbrush, only supported monochrome graphics), Notepad, Write, Terminal, and Clock. The operating environment also has the Cardfile manager, a Clipboard, and a Print Spooler program. Initially, Puzzle and Chess were supposed to appear as playable video games, although Microsoft scrapped the idea; instead, it introduced Reversi as a commercially published video game. It was included in Windows 1.0 as a built-in application, and it relies on mouse control. The operating environment also introduced the Control Panel, which was used to configure the features of Windows 1.0. The operating environment does not allow overlapping windows, and instead, the windows are tiled. When a program gets minimized, its icon would appear on a horizontal line at the bottom of the screen, which resembles the modern-day Windows taskbar.

It consists of three dynamic-link libraries, which are located as files in the system under the names KERNEL.EXE, USER.EXE, and GDI.EXE. The Windows 1.0 SDK contains debugging versions of these files, which can be used to replace the corresponding files on the setup disks. The setup program combines multiple system files into one, so that Windows boots faster. Using the debugging KERNEL.EXE provided by the Windows 1.0 SDK one can create a "slow boot" version of Windows, where the files are separate. Windows 1.0 includes a kernel, which performs functions such as task handling, memory management, and input and output of files, while the two other dynamic-link libraries are the user interface and Graphics Device Interface. The operating environment could also move the program code and data segments in memory, to allow programs to share code and data that are located in dynamic-link libraries. Windows 1.0 implemented the use of code segment swapping.

Version 1.02 introduced drivers for European keyboards, as well as screen and print drivers. The last Windows 1.0 release, 1.04, introduced support for IBM PS/2 computers. Due to Microsoft's extensive support for backward compatibility, it is not only possible to execute Windows 1.0 binary programs on current versions of Windows to a large extent but also to recompile their source code into an equally functional "modern" application with limited modifications.

In March 2022, it was discovered that the operating environment also includes an easter egg that lists the developers who worked on the operating environment along with a message that says "Congrats!"

The GUI consisted of icons which could be clicked on to open files and programs. The desktop contained icons, windows in which programs ran, dropdown menus, and a line at the bottom that displayed running programs, similar to the modern-day taskbar on Windows. The Program Manager was unsophisticated, consisiting of a list of files that referred to a location on the disk. These could be programs, pictures, text files or other types of files. To change the wallpaper, system files had to be edited, which was very dangerous. Buttons were always in a pill shape, except for the control buttons like maximize and minimize, which were squares. Multitasking is cooperative, which means programs could not run at the same time. Instead, they take turns using the processor. Windows could not overlap, instead being tiled.