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It became a web-based service in 1996 and expanded into other classified categories. Having observed people helping one another in friendly, social, and trusting communal ways on the Internet via the WELL, Mind Vox and Usenet, and feeling isolated as a relative newcomer to San Francisco, Craigslist founder Craig Newmark decided to create something similar for local events.In early 1995, he began an email distribution list to friends.The site received criticism and complaints from attorneys general that the section's ads were facilitating prostitution and child sex trafficking.Matt Zimmerman, senior staff attorney for the Electronic Frontier Foundation, said, "Craigslist isn't legally culpable for these posts, but the public pressure has increased and Craigslist is a small company." Brian Carver, attorney and assistant professor at UC Berkeley, said that legal threats could have a chilling effect on online expression.

In June 2012, Craigslist changed its terms of service to disallow the practice. The site is considered particularly useful by lesbians and gay men seeking to make connections, because of the service's free and open nature and because of the difficulty of otherwise finding each other in more conservative areas.

The move came shortly before e Bay's planned spin-off of Pay Pal, and an effort to divest other units to focus on its core business.

As a consequence, the young company was forced to rename to James Edition.

In January 2000, current CEO Jim Buckmaster joined the company as lead programmer and CTO.

Buckmaster contributed the site's multi-city architecture, search engine, discussion forums, flagging system, self-posting process, homepage design, personals categories, and best-of-Craigslist feature. On August 1, 2004, Craigslist began charging to post job openings on the New York and Los Angeles pages.

Craigslist's main source of revenue is paid job ads in select American cities.