With the imminent collapse of the military dictatorship in the early 1980s, a group of left-wing intellectuals were mobilized to create a leftist party. Some of them attempted to work with the labour movement led by Luiz Inacio Lula da Silva, but the group split over ideological grounds. A group of democratic socialists and Trotskyists joined the labour movement and founded the Workers' Party (PT) while the social democrats remained in the Brazilian Democratic Movement Party (PMDB) and would later create the Brazilian Social Democracy Party. Founded on 25 June 1988 by members of the Brazilian Democratic Movement Party (PMDB) linked to the European social democratic movement as an attempt to clarify their ideals, its manifesto preached "democracy as a fundamental value" and "social justice as an aim to be reached". In its foundation, the party attempted to unite political groups as diverse as social democrats, social liberals, Christian democrats and democratic socialists. The period when the PSDB was created was a very significant moment in the history of Brazilian politics.
On 21 April 1985, the Brazilian people witnessed the death of Tancredo Neves, the last President not elected directly by the people since the beginning of the dictatorial government. With the formation of new parties, including the PSDB, a National Constitutional Assembly was created and drafted the current democratic constitution in 1988. A high proportion of the first members of the PSDB came from the so-called "historic PMDB", which was and still is a very large party with many internal conflicts. The founders of the PSDB were dissatisfied with the results of the National Constitutional Assembly and decided to create a party to reflect the need for a national political renewal. As their manifesto states, the new party was created "away from the official benefits, but close to the pulsing of the streets" (taken from a speech by party leader Franco Montoro). Some of the founding members were José Serra, Mário Covas, André Franco Montoro, Fernando Henrique Cardoso, Aécio Neves and Geraldo Alckmin.
In a country where two constitutional referendum, held in 1963 and in 1993, have shown a very strong preference for a presidential system of government as in most countries of the Americas, the PSDB stands almost alone in the preference given in its manifesto to a parliamentarian system of government. However, after the electors rejected parliamentarism in 1993 and even though the PSDB leader Cardoso was elected President the next year, the party did nothing in the last years to further the cause of a parliamentarian system.
The PSDB is one of the largest and most significant political parties in Brazil. Its official program says its policies are social democratic and often associated with the Third Way movement, although the party is also seen as influenced by neoliberalism. The party's program states that it "reject[s] populism and authoritarianism, as well as both fundamentalist neoliberalism and obsolete national-statism".
Despite its name, the PSDB is not a member of the Socialist International which draws together social democratic parties worldwide (the Brazilian member of the Socialist International is the Democratic Labour Party, PDT). The party has not and has never had the links to trade union movements that usually characterize social democratic parties and it used to sponsor a central union, the Social-Democracia Sindical (SDS), which has now merged with the Central Autônoma dos Trabalhadores (CAT) and the much more important Central Geral dos Trabalhadores (CGT) into the União Geral dos Trabalhadores (UGT), but its impact among the unions has always been quite unimpressive compared to even much smaller parties as the PDT or the Communist Party of Brazil, or to the tucanos's own influence in society at large.
A mere six years after its creation, the PSDB won the presidency. It grew faster than any other party in Brazilian history, with an astonishingly good performance in elections at all levels. President Cardoso enjoyed eight years (1994–2002) of political stability in his tenure as President. Accordingly, a good summary of the PSDB's stated program is the following:
- Constant defense of democracy
- The state at a minimally needed size
- Administrative decentralization
- Sustainable economic growth with wealth distribution
- Political reform to make stronger parties with electoral districts accountable representatives as well as aiming to reduce and eliminate corruption