As this ambitious expansion doubled the league's size from six to twelve teams, a large number of players were needed to fill the rosters of the new franchises. Almost all of the leading professional hockey players in North America were already under contract with the six existing franchises; therefore, the draft was established to equitably distribute players from the Original Six clubs (the Boston Bruins, Chicago Black Hawks, Detroit Red Wings, Montreal Canadiens, New York Rangers, and Toronto Maple Leafs) to the new teams. Each expansion team was to select twenty players from the established clubs: two goaltenders and eighteen forwards and defensemen. Thus, a total of 120 players were selected.
The existing clubs were allowed to exclude a goaltender and eleven other players from eligibility in the draft by naming them to "protected" lists. Also excluded from the draft were Junior players, players who were young enough to play Junior (born on or after June 1, 1946) but who were already playing professionally, and players sold to the minor league Western Hockey League and Central Professional Hockey League before June 1, 1966.
The draft began with the drawing of the draft order. Each of the new teams' names was placed on a paper ballot enclosed in a capsule, which was drawn from the bowl of the Stanley Cup by NHL President Clarence Campbell. Montreal Canadiens general manager Sam Pollock helped Campbell draw up the rules for the draft. This draft order was used in the first round to draft goaltenders. The order was then reversed in the second round, which was again specifically for goaltenders. The third round retained the second round's order, and in every subsequent round the draft order would rotate, such that the team that had picked first in the previous round would pick last in the following round while the other teams moved up to fill its place. Each expansion team had three minutes from the time of the previous selection to make its pick.
After each of the first, second, sixth and subsequent rounds in which any of the established teams lost a player, the team in question chose one undrafted player that it had left unprotected and moved him onto their protected lists. Players who had played professionally for the first time in the 1966–67 season were ineligible from being picked until their respective team had filled their protected list with at least two goaltenders and eighteen other players.
The draft began with the picking of the draft order. The Kings picked first, with the North Stars, Flyers, Penguins, Seals and Blues following in that order.
With the first pick in the draft the Kings chose future Hall of Fame goaltender Terry Sawchuk, backbone of the great Detroit Red Wings teams of the 1950s and fresh off a Stanley Cup championship with the Maple Leafs. The first skater chosen was center Gord Labossiere of the Canadiens, also by the Kings, as the 13th selection.
Commentators compared the draft to a rummage sale, with the Original Six losing only unnecessary if not unwanted players. Some of the expansion teams bolstered their rosters before the Draft by purchasing minor league teams outright, thus gaining the rights to the players on their rosters, such as the Springfield Indians of the American Hockey League by the Kings and the Quebec Aces of the AHL by the Flyers, while the North Stars purchased the rights to seven amateur members of the Canadian National Team from Toronto. A poll of minor league sportswriters and executives, following the draft, felt that Philadelphia had gotten the best of the selections and Los Angeles the worst, while the Boston Bruins were the hardest hit of existing clubs. Among the Bruins' players drafted were future Hall of Famer Bernie Parent and future All-Stars J. P. Parise, Poul Popiel, Wayne Connelly, Bill Goldsworthy, Gary Dornhoefer, Ron Schock and Wayne Rivers. It was considered that the Canadiens – reported to have made a number of backroom deals to avoid losing valued unprotected players – fared the best of the established clubs, keeping unprotected talent such as Claude Larose, Carol Vadnais, Serge Savard and Danny Grant.
One controversy arose from the retirement of Toronto star Red Kelly, who was expected to become the Kings' coach. As he was still under contract with the Maple Leafs, they had the rights to his services, but Leafs' general manager Punch Imlach insisted that the Kings use one of their picks to select him, and when this did not materialize, Imlach added Kelly to the Leafs' protected list, forcing the Kings to trade their 15th pick, Ken Block, for Kelly.
J. P. Parisé had the longest career after the Draft of any selection, playing 869 games mostly for the North Stars and retiring after the 1979 season, while Parent, playing in 551 NHL games (not counting his season in the World Hockey Association) had the longest career of any goaltender selected. By contrast, Don Caley, the 2nd pick of St. Louis, played only a single game for the Blues, the only game of his NHL career. Career Black HawkBill Hay, the 11th pick of the Blues, retired before the Draft; nineteen other skaters played 20 or fewer NHL games after the Draft.