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The earliest electronic cigarette can be traced to Herbert A. Gilbert, who in 1963 patented a device described as "a smokeless non-tobacco cigarette" that involved "replacing burning tobacco and paper with heated, moist, flavored air". This device heated the nicotine solution and produced steam. It was never commercialized.

Hon Lik, a Chinese pharmacist and inventor, who worked as a research pharmacist for a company producing ginseng products, is credited with the invention of the electronic cigarette.  Hon had himself quit smoking, after his father, also a heavy smoker, had died of lung cancer. In 2003,  he came up with the idea of using a piezoelectric ultrasound-emitting element to vaporise a pressurized jet of liquid containing nicotine diluted in a propylene glycol solution. This design produces a smoke-like vapour that can be inhaled and provides a vehicle for nicotine delivery into the bloodstream via the lungs. He also proposed using propylene glycol to dilute nicotine and placing it in a disposable plastic cartridge which serves as a liquid reservoir and mouthpiece.

Hon patented the modern e-cigarette design in 2003. Electronic cigarettes using a different design were first introduced to the Chinese domestic market in May 2004 as an aid for smoking cessation and replacement. Many versions made their way to the U.S., sold mostly over the Internet by small marketing firms. The company that Hon Lik worked for, Golden Dragon Holdings, changed its name to Ruyan (如烟, literally "Resembling smoking"), and started exporting its products in 2005–2006 before receiving its first international patent in 2007.