In 2004, an International Panel, commissioned by the South African Institute of Physics, the DST and the NRF, tabled its report on 'Shaping the Future of Physics in South Africa'. One of the recommendations of the report was the establishment of a National Institute for Theoretical Physics that will act as a user facility for South African and African theoretical physicists.

This recommendation initiated a broadly based consultative process within the South African physics community, which resulted in the tabling of a proposal to the DST and NRF in November 2004 on the establishment of a National Institute of Theoretical Physics (NITheP). The proposal was strongly supported by the international physics community - letters of endorsement were received from several physics Nobel laureates as well as the International Centre for Theoretical Physics in Trieste, Italy.

Over the course of the next two years, the proposal was negotiated with government and further refined. In May 2006 government released a media statement announcing the establishment of NITheP, and funding for an initial five-year period was granted late in 2006.  During 2007 the negotiations were finalized, the necessary infra-structure put in place and in December 2007 the first NITheP positions for director, five researchers and five post doctorates were advertised.  On 13 May 2008 the institute was officially launched by the minister of Science and technology, Mr Mosibudi Mangena.