In the 19th century, a number of people had employed an electric arc to melt iron.  Sir Humphry Davy conducted an experimental demonstration in 1810; welding was investigated by Pepys in 1815; Pinchon attempted to create an electrothermic furnace in 1853; and, in 1878–79, Sir William Siemens took out patents for electric furnaces of the arc type.
The first successful and operational furnace was invented by James Burgess Readman in Edinburgh, Scotland, in 1888 and patented in 1889. This was specifically for the creation of phosphorus.
Further electric arc furnaces were developed by Paul Héroult, of France, with a commercial plant established in the United States in 1907. The Sanderson brothers formed The Sanderson Brothers Steel Co. in Syracuse, New York, installing the first electric arc furnace in the U.S. This furnace is now on display at Station Square, Pittsburgh, Pennsylvania.
Initially "electric steel" produced by an electric arc furnace was a specialty product for such uses as machine tools and spring steel. Arc furnaces were also used to prepare calcium carbide for use in carbide lamps.  The Stassano electric furnace  is an arc type furnace that usually rotates to mix the bath.  The Girod furnace is similar to the Héroult furnace.
While EAFs were widely used in World War II for production of alloy steels, it was only later that electric steelmaking began to expand. The low capital cost for a mini-mill—around US$140–200 per ton of annual installed capacity, compared with US$1,000 per ton of annual installed capacity for an integrated steel mill—allowed mills to be quickly established in war-ravaged Europe, and also allowed them to successfully compete with the big United States steelmakers, such as Bethlehem Steel and U.S. Steel, for low-cost, carbon steel "long products" (structural steel, rod and bar, wire, and fasteners) in the U.S. market. 
When Nucor—now one of the largest steel producers in the US — entered the market for long steel products in 1969, they used a mini-mill with an EAF as its steelmaking furnace, soon followed by other manufacturers. Whilst Nucor expanded rapidly in the Eastern US, the companies that followed them into mini-mill operations concentrated on local markets for long products, where the EAF allowed the plants to vary production according to local demand. This pattern was followed globally, with EAF steel production primarily used for long products, while integrated mills, using blast furnaces and basic oxygen furnaces, cornered the markets for "flat products"—sheet steel and heavier steel plate. In 1987, Nucor expanded into the flat products market, still using the EAF production method.