The sign originally read "HOLLYWOODLAND", and its purpose was to advertise a new housing development in the hills above the Hollywood district of Los Angeles. H.J. Whitley had already used a sign to advertise his development Whitley Heights, which was located between Highland Avenue and Vine Avenue. He suggested to his friend Harry Chandler, the owner of the Los Angeles Times, that the land syndicate in which he was involved make a similar sign to advertise their land. Real estate developers Woodruff and Shoults called their development "Hollywoodland" and advertised it as a "superb environment without excessive cost on the Hollywood side of the hills." (An unrelated film named Hollywoodland was made in 2006.)

They contracted the Crescent Sign Company to erect thirteen letters on the hillside, each facing south. The sign company owner, Thomas Fisk Goff (1890–1984) designed the sign. Each letter of the sign was 30 ft (9 m) wide and 50 ft (15 m) high, and was studded with some 4000 light bulbs. The sign was officially dedicated on July 13, 1923. It was not intended to be permanent. Some sources[who?] say its expected life was to be about a year and a half, but after the rise of the American cinema in Los Angeles it became an internationally recognized symbol, and was left there.

In June 1924 English-born John Simpson and two others attempted to steal the Hollywood sign one letter at a time. The bungled robbery resulted in the deaths of 24 year old Simpson's co-conspirators Michael Reed and Andrew Sharp. The resulting trial and imprisonment of Simpson was highly publicised, particularly in the Los Angeles area and also in his native homeland of England were he was labelled the "Hollywood Hustler".

In September 1932, Broadway actress Peg Entwistle, a resident of Beachwood Canyon, committed suicide by jumping to her death from the letter H.[3]

(3) ^ "Suicide Laid To Film Jinx". Los Angeles Times. 1932-09-20. pp. A1.