IndiGo was set up in early 2006 by Rahul Bhatia of InterGlobe Enterprises and Rakesh Gangwal, a United States-based NRI. InterGlobe holds 51.12% stake in IndiGo and 48% is held by Gangwal's Virginia-based company Caelum Investments. IndiGo placed a firm order for 100 Airbus A320-200 aircraft in June 2005 with plans to commence operations in mid-2006. IndiGo took delivery of its first Airbus A320-200 aircraft on 28 July 2006, nearly one year after placing the order, and commenced operations on 4 August 2006 with a service from New Delhi to Imphal via Guwahati. By the end of 2006, the airline had six aircraft. Nine more aircraft were acquired in 2007 taking the total to 15. By December 2010, IndiGo replaced the state run flag carrier Air India as the top third airline in India. It already had 17.3% of the market share, behind Kingfisher Airlines and Jet Airways. By early 2012, IndiGo had taken the delivery of its 50th aircraft in less than six years. In 2011, IndiGo placed an order for 180 aircraft Airbus A320 aircraft in a deal worth US$15 billion which pushed up the percentage of Airbus aircraft in India to 73%.
As of 2012, IndiGo was expanding rapidly and was the only profitable airline in India. It replaced Kingfisher as the second largest airline in India in terms of market share. IndiGo strongly adheres to a low-cost model, buying only one type of aircraft and keeping operational costs as low as possible along with an emphasis on punctuality. IndiGo added a new plane every six weeks and sometimes even faster. In December 2011, the DGCA highlighted problems resulting from the expansion could impact safety. On 17 August 2012, IndiGo became the largest airline in India in terms of market share (27%) surpassing Jet Airways, six years after operations commenced.
In January 2013, IndiGo was the second fastest growing low-cost carrier in Asia behind Indonesian airline Lion Air. In February 2013, following the civil aviation ministry announcing that it would be allowing IndiGo to take the delivery of only five aircraft that year, reports suggested that the airline was in plans to introduce low-cost regional flights by setting up a subsidiary. However, IndiGo announced that it actually plans to seek permission from the ministry to acquire four more aircraft, therefore taking the delivery of nine aircraft in 2013. In August 2013, the Center for Asia Pacific Aviation ranked IndiGo among the 10 biggest low-cost carriers in the world.
In August 2015, IndiGo had placed an order of 250 Airbus A320neo aircraft worth $27 billion, making it the largest single order ever in Airbus history.