A nuclear chain reaction was proposed by Leo Szilard in 1933, shortly after the neutron was discovered, yet more than five years before nuclear fission was first discovered. Szilárd knew of chemical chain reactions, and he had been reading about an energy-producing nuclear reaction involving high-energy protons bombarding lithium, demonstrated by John Cockcroft and Ernest Walton, in 1932. Now, Szilárd proposed to use neutrons theoretically produced from certain nuclear reactions in lighter isotopes, to induce further reactions in light isotopes that produced more neutrons. This would in theory produce a chain reaction at the level of the nucleus. He did not envision fission as one of these neutron-producing reactions, since this reaction was not known at the time. Experiments he proposed using beryllium and indium failed.
Later, after fission was discovered in 1938, Szilárd immediately realized the possibility of using neutron-induced fission as the particular nuclear reaction necessary to create a chain-reaction, so long as fission also produced neutrons. In 1939, with Enrico Fermi, Szilárd proved this neutron-multiplying reaction in uranium. In this reaction, a neutron plus a fissionable atom causes a fission resulting in a larger number of neutrons than the single one that was consumed in the initial reaction. Thus was born the practical nuclear chain reaction by the mechanism of neutron-induced nuclear fission.
Specifically, if one or more of the produced neutrons themselves interact with other fissionable nuclei, and these also undergo fission, then there is a possibility that the macroscopic overall fission reaction will not stop, but continue throughout the reaction material. This is then a self-propagating and thus self-sustaining chain reaction. This is the principle for nuclear reactors and atomic bombs.
Demonstration of a self-sustaining nuclear chain reaction was accomplished by Enrico Fermi and others, in the successful operation of Chicago Pile-1, the first artificial nuclear reactor, in late 1942.