In 1881, Seiko founder Kintarō Hattori opened a watch and jewelry shop called "K. Hattori" in Tokyo. Kintarō Hattori had been working as a clockmaker apprentice since the age of 13, with multiple stints in different watch shops, such as “Kobayashi Clock Shop,” run by an expert technician named Seijiro Sakurai; “Kameda Clock Shop” in Nihonbashi; and “Sakata Clock Shop” in Ueno, where he learned how to both sell and repair timepieces.

Around the time of Seiko's founding, watchmakers in Tokyo, Osaka, and Nagoya were studying and producing pocket watches based on Western products. Japanese wholesalers needed to purchase all the imported timepieces from foreign trading companies established in Yokohama, Kobe, and other open port areas.

In 1885, Hattori began dealing directly with these foreign trading firms in the Yokohama settlement, focusing on the wholesaling and retailing of Western (imported) timepieces and machinery.

Over the years, Hattori developed a close partnership with multiple foreign trading firms, including C&J Favre-Brandt, F. Perregaux & Co., Zanuti & Cie. and Siber & Brennwald, allowing him to obtain exclusive imported timepieces and machinery, which was not available elsewhere at that time.

Hattori's shop became increasingly popular due to the rarity of the imported watches the shop was selling, which couldn't be found anywhere else in Japan. The growing success allowed him to relocate the company to the main street of Ginza (Tokyo), still the epicenter of commerce in Japan to this day.

In 1891, 10 years after the establishment of K. Hattori & Co., the 31-year-old Kintaro was appointed director of the Tokyo Clockmaker and Watchmaker Association and member of the Tokyo Chamber of Commerce.

In 1892, Hattori began to produce clocks under the name Seikosha, meaning, roughly, "House of Exquisite Workmanship." According to Seiko's official company history, titled A Journey in Time: The Remarkable Story of Seiko, Seiko is a Japanese word meaning "exquisite" (Seikō); it is homophonous with the word for "success" (Seikō).

In 1895, the watch dealer purchased the corner of Ginza 4-chome (the present-day location of WAKO), and constructed a building with a clock tower (16 meters from top to bottom), setting up shop at the new address.

Seiko launched its first in-house pocket watch, the Timekeeper, in 1895; the first Japanese-made wristwatch, the Laurel, in 1913; and the first Seiko-branded wristwatch in 1924.

In order to avoid an ill omen believed to be associated with the word "GLORY" in Japanese, Seikosha changed its trademark to "Seiko" in 1924.

In 1929, the Seiko pocket watch was adopted as the official watch for the drivers of Japanese Government Railways.