Knit the City maintains a sense of humour about their group's beginnings and tells a different story each time they are interviewed. The genuine story is that the collective was founded by Deadly Knitshade, later revealed to be author and Stitch London founder Lauren O'Farrell, who anonymously invited five hand-picked members to join forces in February 2009 on a mission to "turn the city knitwise". The collective was partly inspired by O'Farrell's 2007 London Lion Scarf charity event, when her Stitch London craft community created giant scarves for London's Trafalgar Square Lions to raise money for Cancer Research UK, and partly by a 2009 event in which Magda Sayeg of Knitta Please, Stitch London, and Guardian journalist Perri Lewis collaborated in graffiti knitting London's South Bank.
The members of the group use superhero-style names to hide their real identities. Initial Yarn Corps members were Deadly Knitshade, Knitting Ninja, Lady Loop, Shorn-a the Dead, Bluestocking Stitching and The Purple Purl, with the addition of The Fastener in October 2009. In creating the group's identity, Knitshade also coined the term 'yarnstorming' as a less violent alternative to the US term yarnbombing. The term has now been adopted by many groups, and was first used in the media on BBC News in June 2009.
Deadly Knitshade is widely credited with innovating the concept of telling 'stitched stories' in graffiti knitting and crochet, using amigurumi knitted and crocheted characters, creatures and objects. The earliest recorded example of this is Knit the City's "Web of Woe" installation in August 2009, which was installed in London's Leake Street. The concept has since been adopted by groups worldwide and made national news.