The band has achieved commercial success with the release of five studio albums. System of a Down has been nominated for four Grammy Awards, and won the award in 2006 for Best Hard Rock Performance for the song "B.Y.O.B.". On August 13, 2006, the group went on indefinite hiatus.

Serj Tankian and Daron Malakian both attended Rose and Alex Pilibos Armenian School while children, although due to their eight year age difference they did not meet until 1992 while working on separate projects at the same recording studio. They formed a band named Soil with Tankian on vocals and keyboards, Malakian on vocals and guitar, Dave Hakopyan (who later played in The Apex Theory/Mt. Helium) on bass and Domingo "Dingo" Laranio on drums. The band hired Shavo Odadjian (another Rose and Alex Pilibos alumnus) as manager, although he eventually joined Soil as rhythm guitarist. After three years, only one live show, and one jam session recording, Hakopyan and Laranio quit the band, feeling that it wasn't going anywhere.

After Soil split up, Tankian, Odadjian, and Malakian formed a new band, System of a Down. The group took its name from a poem that Malakian had written titled “Victims of the Down." The word "victims" was changed to "system" because Odadjian believed that the alteration would appeal to a much wider audience and also because the group wanted to be shelved closer to their musical heroes, Slayer. Odadjian switched from guitar to bass and passed on his managerial duties to Velvet Hammer Music and Management Group and its founder David “Beno” Benveniste.[citation needed] The band recruited drummer Ontronik "Andy" Khachaturian, an old school friend of Malakian's and Odadjian's who had played with Malakian in a band called Snowblind during their teens.

System of a Down quickly made what is known as Untitled 1995 Demo Tape, which was not commercially released but appeared on file sharing networks around the time of the band's success with Toxicity about six years later. The tape contained very early recordings of "Mr. Jack" (called "P.I.G." on the tape and sometimes known as "Bacon"), along with a song called "Toast" and an early recording of "The Metro," a cover of new wave group Berlin's song of the same name. A song segment called "Flake," which also appeared on the tape, is actually the closing breakdown section of "P.I.G" and was simply split incorrectly when the tape was leaked onto the internet. Two other songs, “Multiply” (later released as "X") and "Honey" were released as live demos on Demo Tape 1, which also featured early versions of "Sugar", "Suite-Pee", and "P.L.U.C.K.", as well as "DAM", a song that would not appear on any future System of a Down releases.

Demo Tape 2 was released in 1996 and consisted of a rough demo of the song "Soil" as well as tracks "Honey" and "Temper", which, like "DAM," would not find their way on any future releases. At the beginning of 1997, System of a Down recorded their final publicly released demo tape, Demo Tape 3, which featured rough versions of "Peephole", "War?", and "Know". In mid 1997, drummer Khachaturian left the band due to a hand injury (he subsequently co-founded The Apex Theory, which included former Soil bassist Dave Hakopyan). Khachaturian was replaced by John Dolmayan.

The band's first official release of a professionally recorded song was on a collection called Hye Enk ("we're Armenian" in English), an Armenian Genocide recognition compilation, in 1997. The band provided one song to the album, "P.L.U.C.K. (Politically Lying Unholy Cowardly Killers)," a song about the Genocide that would be re-worked and re-recorded for the band's debut album. Soon after playing at notable Hollywood clubs such as the Whisky-A-Go-Go and Viper Room the band caught famed producer Rick Rubin's attention who asked them to keep in touch with him. Showing great interest, the group recorded Demo Tape 4 near the end of 1997. Unlike the previous demo tapes, however, Demo Tape 4 was made only to be sent to record companies (although it has since been leaked onto the internet). Rubin signed the group onto his American/Columbia Records, and System of a Down began to record in Rubin's studio, laying down tracks that would eventually be released on their debut album.

Also in 1997, the group won the Best Signed Band Award from the Rock City Awards.

In June 1998, System of a Down released their debut album, System of a Down. They enjoyed moderate success as their first singles "Sugar" and "Spiders" became radio favorites and the music videos for both songs were frequently aired on MTV. After the release of the album, the band toured extensively, opening for Slayer and Metallica before making their way to the second stage of Ozzfest. Following Ozzfest, they toured with Fear Factory and Incubus before headlining the Sno-Core Tour with Puya, Mr. Bungle, The Cat and Incubus providing support.

In November 1998, System appeared on South Park's Chef Aid album, providing the music for the song "Will They Die 4 You?" Near the end of the song Serj can be heard saying, "Why must we kill our own kind?" a line that would later be used in the song "Boom!" Although System of a Down is credited on the album, South Park character Chef doesn't introduce them as he does for all other artist featured on the record.

System of a Down's former drummer, Ontronik Khachaturian, briefly reunited with the band at a show at The Troubadour in 1999, filling in on vocals for an ill Tankian.