About a dozen sport loving citizens decided on 16 November 1888 in a cafe in Budapest to form the Magyar Testgyakorlók Köre (Circle of Hungarian Fitness Activists). A number of its founding members were aristocrats and members of the capital's Jewish community. The colours of the club became blue and white, and it had 31 members by the end of its inaugural year. The club's first divisions offered sporting possibilities only for fencing and gymnastics. As football was spreading far and wide in Hungary also the club established its football division on 12 March 1901. The first public football match of the Blues was a 0–0 draw against BTC, which later became Hungarian champions in 1901 and 1902. MTK started to play football in the 2nd league in 1902, but a year later the club got the chance to play in the first league. The first year brought the club a 3rd place and it did not take long for the Blues to win the first championship, which happened a year later in 1904.
The first president of the club became a well-to-do entrepreneur, his vice a close friend of him who turned out to be an excellent sport oriented organiser. His name was Alfréd Brüll who became the club's legendary and respected president from 1905 until the 1940s. Before the introduction of professional football MTK was the most successful Hungarian team. Prior to the Second World War the team managed to win 15 Hungarian League titles and gained 7 Hungarian Cup victories. During the professional era the team could not repeat the same performance but still won 2 championships. Due to the participation of many Jewish figures in the club, it had the reputation of being a "Jewish" team beginning in the 1930s and 1940s,  a phenomenon that continues to the present.
MTK also played a major role in the success of the legendary Hungary team known as the Mighty Magyars. While Honvéd provided the team with a nucleus of players, it was Márton Bukovi at MTK who developed the vital 4–2–4 formation, later adopted by national coach Gusztáv Sebes, himself a former MTK player. It was also at MTK that Bukovi together with, Péter Palotás and Nándor Hidegkuti, also pioneered the crucial deep lying centre-forward position. In 1953 Hidegkuti would exploit this position to great effect as he scored a hat-trick for Hungary when they beat England6–3 at Wembley Stadium. In addition Mihály Lantos and József Zakariás provided the Mighty Magyars with a solid defence. During the early 1950s these MTK players helped Hungary become Olympic Champions in 1952, Central European Champions in 1953, defeat England twice and reach the 1954 World Cup final. They absorbed Egyetértés VM After the first half of 1974–75 season. They were relegated to the Second League twice in 1980–81 season after finishing 17th or second from last and in 1993–94 season after finishing 16th or last.
In the 1960s MTK Budapest did not win Hungarian League titles only the Hungarian Cup in 1968. In the 1962–63 season of the Hungarian League MTK finished second which resulted the participation in the European Cup Winners Cup in the following year. In the 1963–64 season of the European Cup Winners' Cup MTK Budapest reached the final. MTK Budapest beat PFC Slavia Sofia in the preliminary round,FSV Zwickau in the first round,Fenerbahçe S.K. in the quarter finals, the Scottish Celtic F.C. in the semi-finals and lost to Sporting C.P. in the final after extra time. After this success MTK Budapest were not able to finish in the best three of the Hungarian League in the 1960s.
In the 2010–11 season of the Hungarian League, MTK Budapest finished 15th, which resulted in its relegation from the first league. In the 2011-12 season, MTK Budapest finished first in the second division and was promoted back to the first division of the Hungarian League. Moreover, in the 2011–12 Hungarian Cup, MTK Budapest made the final, where they lost to Debrecen in a penalty shoot-out. As a consequence of reaching the final, MTK Budapest qualified for the UEFA Europa League 2012–13.