The Children's Bureau was formally created in 1912 when President William Howard Taft signed into law a bill creating the new federal government organization. The stated purpose of the new Bureau was to investigate and report "upon all matters pertaining to the welfare of children and child life among all classes of our people."

The signing of this law culminated a grass-roots process started in 1903 by two early social reformers, Lillian Wald, of New York's Henry Street Settlement House, and Florence Kelly, of the National Consumer's League. Along the way, their efforts picked up support from President Theodore Roosevelt, among other prominent supporters, before finally becoming law nine years after they launched the initiative.

After several false starts in Congress, the successful bill was sponsored by Senator William E. Borah. The bill authorized the creation of a 16-person organization, with a first-year budget of $25,640. Initially part of the Department of Commerce, the Children's Bureau was transferred to the Department of Labor in 1913. The law also called for the Bureau to be headed by a Chief, who would be a Presidential appointee, subject to Senate confirmation. The first Chief of the Children's Bureau was Julia Lathrop.