The Fender Telecaster was developed by Leo Fender in Fullerton, California in 1950. In the period roughly between 1932 and 1949, several craftsmen and companies experimented with solid-body electric guitars, but none had made a significant impact on the market. Leo Fender's Telecaster was the design that finally put the solid-body guitar on the map.

Fender had an electronics repair shop called Fender's Radio Service where he first repaired, then designed, amplifiers and electromagnetic pickups for musicians—chiefly players of electric semi-acoustic guitars, electric Hawaiian (lap steel) guitars, and mandolins. Players had been 'wiring up' their instruments in search of greater volume and projection since the late 1920s, and electric semi-acoustics (such as the Gibson ES-150) had long been widely available. Tone had never, until then, been the primary reason for a guitarist to go electric, but in 1943, when Fender and his partner, Clayton Orr "Doc" Kauffman, built a crude wooden guitar as a pickup test rig, local country players started asking to borrow it for gigs. It sounded shiny and sustaining. Fender was intrigued, and in 1949, when it was long understood that solid construction offered great advantages in electric instruments, but before any commercial solidbody Spanish guitars had caught on (then small Audiovox company apparently offered a modern, solidbody electric guitar as early as the mid-1930s), he built a better prototype.

That hand-built prototype, an anonymous white guitar, had most of the features of what would become the Telecaster. It was designed in the spirit of the solid-body Hawaiian guitars manufactured by Rickenbacker – small, simple units made of Bakelite and aluminum with the parts bolted together—but with wooden construction. (Rickenbacker, then spelled 'Rickenbacher,' also offered a solid Bakelite-bodied electric Spanish guitar in 1935 that seemed to presage details of Fender's design.)

The initial single-pickup production model appeared in 1950, and was called the Esquire. Fewer than fifty guitars were originally produced under that name, and most were replaced under warranty because of early manufacturing problems. In particular, the Esquire necks had no truss rod and many were replaced due to bent necks. Later in 1950, this single-pickup model was discontinued, and a two-pickup model was renamed the Broadcaster. From this point onwards all Fender necks incorporated truss rods. The Esquire was reintroduced as a one-pickup Telecaster, at a lower price.

The so-called Nocaster was a short-lived variant of Telecaster. Produced in early to mid-1951, it was the result of legal action from the Gretsch company over the guitar's previous name, the Broadcaster (Gretsch already had the "Broadkaster" name registered for a line of drums). In the interim, before Fender had come up with an alternate name and printed appropriately revised headstock decals, factory workers simply snipped the "Broadcaster" name from its existing stock of decals, so guitars with these decals are identified simply as "Fender", without any model name. By the summer of 1951 the guitar was officially renamed as the Telecaster and has been known as such ever since.

The term Nocaster was originally coined by collectors to denote these transitional guitars that appeared without a model name on the headstock. Since they were manufactured in this form for only a few months very early in the Broadcaster/Telecaster's history, original Nocasters are highly prized and expensive collector's items. There are no official production numbers, but experts estimate that fewer than 500 Nocasters were produced. Fender has since registered Nocaster as a trademark to denote its modern replicas of this famous rarity.

In 1951, Fender also released the Precision Bass as a stablemate to the Telecaster. This was later released as the Fender Telecaster Bass in 1968 when Fender updated the Precision Bass to more closely resemble the Stratocaster in 1957.

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