Although often conflated with the luxury vehicle manufacturer Volvo Cars, also based in Gothenburg, the two firms have been independent since AB Volvo sold Volvo Cars to Ford Motor Company in 1999. Volvo Cars has been owned since 2010 by the Geely Holding Group, a Chinese multinational automotive manufacturing company. Both AB Volvo and Volvo Cars share the Volvo logo and cooperate in running the Volvo Museum.

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The company first listed on the Stockholm Stock Exchange in 1935 and it was also listed on other NASDAQ indices from 1985 to June 2007.

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Volvo was established in 1915 as a subsidiary of SKF, the ball bearing manufacturer; however the Volvo Group and Volvo Cars consider themselves to have been officially founded on 14 April 1927, when the first car, the Volvo ÖV 4 series, nicknamed as "Jakob", rolled out of the factory in Hisingen, Gothenburg. The building remains (57°42′50″N 11°55′19″E).

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Volvo means "I roll" in Latin, conjugated from "volvere", in reference to ball bearings. The brand name Volvo was originally registered as a trademark in May 1911 with the intention to be used for a new series of SKF ball bearings. This idea was only used for a short period and SKF decided to simply use "SKF" as the trademark for all its bearing products.

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In 1924, Assar Gabrielsson, an SKF sales manager, and a KTH Royal Institute of Technology educated engineer Gustav Larson, the two founders, decided to start construction of a Swedish car. They intended to build cars that could withstand the rigors of the country's rough roads and cold temperatures.

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AB Volvo began activities on 10 August 1926. After one year of preparations involving the production of ten prototypes, the firm was ready to commence the car-manufacturing business within the SKF group. The Volvo Group itself considers it started in 1927, when the first Volvo car rolled off the production line at the factory in Gothenburg. Only 280 cars were built that year. The first truck, the "Series 1", debuted in January 1928, as an immediate success and attracted attention outside the country. In 1930, Volvo sold 639 cars, and the export of trucks to Europe started soon after; the cars did not become well-known outside Sweden until after World War II. AB Volvo was introduced at the Stockholm Stock Exchange in 1935 and SKF then decided to sell its shares in the company. By 1942, Volvo acquired the Swedish precision engineering company Svenska Flygmotor (later renamed as Volvo Aero).

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Pentaverken, who had manufactured engines for Volvo, was acquired in 1935, providing a secure supply of engines and entry into the marine engine market.

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The first bus, named B1, was launched in 1934, and aircraft engines were added to the growing range of products at the beginning of the 1940s. In 1963, Volvo opened the Volvo Halifax Assembly plant, the first assembly plant in the company's history outside of Sweden in Halifax, Nova Scotia, Canada.

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In 1950, Volvo acquired the Swedish construction and agricultural equipment manufacturer Bolinder-Munktell. Bolinder-Munktell was renamed as Volvo BM in 1973 and, in 1979, its agricultural equipment business was sold to Valmet. Later, through restructuring and acquisitions, it became Volvo Construction Equipment.