The foundation of the Central European Initiative was laid in the Agreement signed on 11 November 1989 in Budapest by Austria, Italy, Hungary and the Socialist Federal Republic of Yugoslavia (SFRY), and it established a platform for political, economic, scientific and cultural cooperation which came to be known as the Quadrigonal Cooperation. With the accession of Czechoslovakia in May 1990 the mechanism was renamed into Pentagonal and with the membership of Poland in 1991 into Hexagonal Initiative. After the dissolution of SFR Yugoslavia and the accession to the initiative of 4 republics of the former SFRY in 1992, the Central European Initiative acquired its current name.

By the mid 90’s, CEI had 16 Member States (the new members were Albania, Belarus, Bulgaria, Moldova, Romania, Czech Republic, Slovakia and Ukraine). In this period the contemporary organisational structure was formed through the establishment of the CEI Trust Fund at the European Bank for Reconstruction and Development (EBRD), Secretariat for CEI Projects in London and Executive Secretariat in Trieste. FR Yugoslavia joined CEI in 2000 and one year later the CEI Cooperation Fund was established. After regaining independence, Montenegro became the 18th member of CEI on 1 August 2006.

As a mechanism of regional cooperation CEI is distinctive in more than one way: It was the first regional co-operation initiative to be established after the end of the Cold War; it operates on the political level, as well as on the level of individual projects; it has a high degree of regional ownership and relies on the bottom-up approach in the implementation of its specific activities.