The Commonwealth Council of Federated Unions was founded as an advisory body at a Melbourne Conference of Commonwealth registered unions held in February 1923. Its functions were limited to dealing with issues that arose from the administration of the Commonwealth Conciliation and Arbitration Act and other federal legislation involving wages, hours of labour and employment conditions for members of federal organisations. It was not to interfere with the affairs of the States Trades and Labor Councils and individual unions. It was based largely in Victoria with C A Crofts (Federated Gas Employees' Industrial Union) as Secretary and H G Gibson (Federated Engine Drivers and Firemen's Association of Australia) as the first President. The main issues of concern to organise opposition to attempts by employer organisations to have the Basic Wage reduced, to conduct a campaign for the restoration of the 44-hour week where it had been withdrawn, and to establish the principle as a standard in all industries. By 1926 it had about 60 affiliates that represented 300 000 unionists. However, as a result of its inefficient handling of the Basic Wage review case, and due to its rejection of the State Labor Councils' proposals to be agents of the Federal structure, it was superseded by a new Australasian body the Council of Trade Unions in 1927.

The beginnings of the ACTU can be traced to a Trade Union Congress held in the Melbourne Trades Hall Council on 3 May 1927. The meeting was convened to 'consider the possibility of creating a representative body for the whole trade union movement in Australia'. The Congress elected a Committee of seven which produced a report including a proposed constitution for a new body named the Australasian Council of Trade Unions, which was accepted with two minor amendments on 7 May 1927. The name was changed to the Australian Council of Trade Unions at the 1947 Congress. The Australian Workers' Union joined the ACTU in 1967, and the ACTU's merger with two leading federations of white-collar unions, the Australian Council of Salaried and Professional Associations in 1979, and the Council of Australian Government Employee Organisations in 1981, gave it about 2,500,000 members, or more than three-quarters of trade union membership in Australia. The ACTU is the recognised representative of organised labour in centralised wage negotiations with business and the federal government. It has traditionally maintained a close association with the Australian Labor Party, though not actually affiliated to it. Robert Hawke, who was president of the ACTU from 1970 to 1980, went on to serve as Australian prime minister from 1983 to 1991 and later Presidents Simon Crean and Martin Ferguson became Federal ministers. The ACTU's policy-making body, a biennial congress, is made up of delegates from state branches of the federation (Trades and Labor Councils) and from affiliated trade unions.