Christina Amphlett and Mark McEntee wrote the song in 1990 with the songwriting team of Tom Kelly and Billy Steinberg (who have written songs such as "I'll Stand by You," "Like a Virgin," "Eternal Flame," "True Colors" and "So Emotional"). Billy Steinberg had "I Touch Myself" in his notebook; he had written the first verse and the chorus lyric. Amphlett liked it immediately. The next day, McEntee, Steinberg, Kelly, and Amphlett got together and wrote the rest, an unusual move, as Steinberg and Kelly rarely collaborated with others. Putting the song together took a lot of trial and error. It was recorded to two inch tape, making it difficult to edit. After significant experimentation they came up with an unusual structure with the bridge placed after the first chorus.
In Australia "I Touch Myself" was released as a CD single in December 1990 and debuted at No. 31 later that month. After five weeks of being in the chart the song jumped to No. 1 knocking Vanilla Ice's debut single "Ice Ice Baby" off the top spot and stayed there for another week. It debuted on the UK Singles Chart at No. 69 and on its eighth week it peaked at No. 10 (its peak position in the UK) and spending a total of twelve weeks in the chart. When released in the United States, the song caused a minor controversy. However, it managed to reach the top five of the BillboardHot 100 chart, peaking at No. 4 and at No. 2 on the Billboard Modern Rock Tracks chart, after receiving extensive play on modern rock radio, which was more accepting of the song's subject matter. The Divinyls are considered a one-hit wonder in the US, as "I Touch Myself" was their only Stateside Top 40.
In 2000, the Industrial metal band Genitorturers released their album Machine Love which included a cover version of "I Touch Myself", with slightly altered lyrics, making the singer the dominant party in the song, rather than submissive. It is often mistaken to be a Jack Off Jill cover.
Rolf Harris performed a tongue-in-cheek version, accompanied only by his wobble board and asides full of innuendo, for Andrew Denton's Musical Challenge on the MMM Breakfast Show. This recording was released on the first Musical Challenge compilation album in 2000.
In 2005, the a cappella group Last Call  from Cornell University released their fourth album Straight Up, whose fourth track is a cover of "I Touch Myself". This cover is, obviously, a cappella and is sung at a slightly faster pace. In the same year the Belgium all-girls choir Scala & Kolacny Brothers did a classical cover version.
It was remade as a dance song by Lenny B featuring Kristy Kay.
Alternative rock band Eve 6 occasionally covers the song during performances.
In September 2006, Australian singer-songwriter and former Bardot member, Tiffani Wood, released the song as the third single from her solo album Bite Your Tongue. It did not however make an impact on the ARIA Charts.
Australian musician and songwriter Megan Washington covered this song during the band's 2010 Australian tour to promote their album, I Believe You Liar.
Artist Alana D is listed in the credits of the film Miss March as having recorded a cover of the song for the film. However, the track does not appear on the official soundtrack and is not available for purchase.