After witnessing the unrest that the Depression caused in California, and after glimpsing his own mortality in the death of a close friend in 1936, agricultural pioneer James Irvine decided in 1937 to establish a foundation that would promote the "general well-being of the citizens and residents of the state of California." Trusting the value of land, he established The James Irvine Foundation as the primary stock holder of The Irvine Company, which held Mr. Irvine's most valuable asset: about 110,000 acres of prime ranch land — almost a third of present-day Orange County. "No other security," Irvine predicted, could afford the Foundation and its causes "a more stable and safe investment than the capital of The Irvine Company."

The new Foundation made its first grant in 1937, for a sum of $1,000. By 1947, its largest grant had increased to $5,000. With the death of James Irvine the same year, the Foundation began receiving the full interest from its Company stockholdings, thereby increasing its grantmaking capacity. From 1948 to 1957, over $2 million was expended in grants to higher education, community service organizations, cultural services, health care and youth programs.

During the 1940s and 1950s, new residents continued to pour into the state, particularly to Southern California, where they moved into sprawling cities built upon prime agricultural land. The Irvine Company, located in one of the fastest-growing counties in the nation, increasingly felt external pressures during the 1950s to open its lands to real estate development. Its response — community planning allowing for a wide range of uses, including higher education (providing the initial land for the University of California, Irvine campus) and agriculture — provided a contrast to the unplanned sprawl nearby. Just as the ranch had become known for adopting new agricultural techniques, the Company soon enjoyed a reputation for inaugurating community planning on a large scale.

Eventually, The Irvine Foundation was forced to sell its share in the Company to comply with new federal legislation. When James Irvine died in 1947, his gift to the Foundation was valued at $5.6 million; when the Foundation's share of the Irvine Company was sold 30 years later, his bequest had grown in value to $184 million; and at the end of 2007, these assets had grown to more than $1.8 billion.