Paperchase was founded by two art students, Judith Cash and Eddie Pond, around 1968. The company went through various owners before receiving investment from W H Smith in 1985; it continued to expand and in 1996 became Paperchase Products Ltd., having been bought by the existing management with investment from a venture capital fund. In 2004 Borders Group Inc. bought out Graphite Capital, and the company grew internationally within the Borders network. In 2007 Borders sold a majority stake in the UK and Irish division of Borders book stores to Risk Capital for £10 million. In May 2008, the Borders Group announced it was considering selling its 97% share to one of either HgCapital, Isis Equity Partners or Change Capital, with W H Smith interested in putting in a £50 million bid – 12 years after selling it at £1 million. With the administration and closure of Borders in late 2009, the company lost a large presence on the British high street as there was a Paperchase concession within every UK Borders. The UK division of Borders separated from its parent and the owner of Paperchase in 2007, and all Borders stores closed on 22 December 2009. To replace these lost UK retail sites, Paperchase concessions were formed in a number of HMV and Waterstones stores during 2010. In 2010, a management buy-out was completed and the company is now owned by Primary Capital Partners LLP and its board of directors.
In February 2010, the company was accused of stealing artwork created by an independent British artist, Hidden Eloise. An artist working for the agency Gather No Moss eventually admitted tracing the artwork. In November 2017, the company issued an apology for running an advert for free wrapping paper in the Daily Mail on Saturday 18 November, following a campaign by the group Stop Funding Hate. Journalists Julia Hartley-Brewer and Piers Morgan condemned the decision. The Daily Mail responded by stating "it is deeply worrying that Paperchase should have allowed itself to be bullied into apologising - on the back of a derisory 250 Facebook comments and 150 direct tweets - to internet trolls orchestrated by a small group of hard left Corbynist individuals seeking to suppress legitimate debate and impose their views on the media... Has the company considered what message they are sending to the four million people who read the Daily Mail on Saturday, many of whom will be their customers?"