It was founded by Uriah Stephens in Philadelphia, Pennsylvania on December 28, 1869; reaching 28,000 members by 1880.  North America's first true international labor organization and the earliest practitioner of "industrial unionism".  It originated as a secret organization meant to protect its members from employer retaliations. Secrecy also gave the organization an emotional appeal.  Credited with having coined the phrase, "an injury to one is the concern of all". in 1879, the group abandoned its secrecy and mystical trappings and struck the word noble from its title.

The KOL’s influence declined sharply after 1886—a year marked by 1,600 strikes (some of them violent) and the deadly Haymarket Riot in Chicago. The resulting backlash against unionism, along with the dissatisfaction of many KOL members, led to the union’s demise and fostered the establishment of the American Federation of Labor (AFL) in December 1886. The AFL focused on winning economic benefits for its members through collective bargaining. As a federation, it represented several national craft unions that each retained autonomous operations. The Knights, by contrast, represented both craft and unskilled workers in a single national union.