It was founded in the early 1970s and expanded from its initial base in Melbourne until it had branches in every major city. It has had a lively internal life and saw a breakaway faction in the 1980s called Socialist Action led by Tom O'Lincoln which later rejoined the IS. At this point they changed their name to the ISO.
More recently they have experienced major internal schisms. This led to the loss of a members, mainly but not exclusively in Melbourne, who founded Socialist Alternative in 1995. In 2003 another grouping of members split from the ISO as did Tom O'Lincoln who has since joined Socialist Alternative. The ISO is a part of the Socialist Alliance.
Like their sister parties they produce a newspaper called Socialist Worker and run a bookshop called Bookmarks.