The University in Exile, which formally came to be named the Graduate Faculty of Political and Social Science, was established by Alvin Johnson, economist and director of the New School for Social Research, in 1933. Through his work in Europe editing the Encyclopaedia of Social Sciences, Johnson became aware of the increasingly hostile and dangerous political climate in Germany. After Adolf Hitler and the National Socialist Party seized power in 1933, Johnson sought a way to provide refuge to Jewish and politically progressive scholars, and over the spring of 1933 he launched an intensive fund raising campaign. Ultimately, with most of the funds coming from industrialist Hiram J. Halle and the Rockefeller Foundation, Johnson succeeded in offering teaching posts at the New School to ten social scientists whose lives and livelihoods were threatened.

Initially called the University in Exile, the program's first faculty members, appointed in October 1933, were Karl Brandt, Gerhard Colm, Arthur Feiler, Eduard Heimann, Herman Kantorowiez, Emil Lederer, Hans Speier, Erich von Hornbostel, Max Wertheimer, and Frieda Wunderlich. Later appointments made in 1938 included Austrian professors Erich Hula, Felix Kaufman, and Ernst Karl Winter, and Italian scholar Nino Levi.

By June 1934, the University of the State of New York granted a provisional charter to the New School for Social Research, allowing the institution to award MSS (Master of Social Science) and DSS (Doctor of Social Science) degrees. Before completing registration (accreditation) with the State of New York, a Committee of Requirements for Degrees was established in 1934. The Graduate Faculty Constitution and By-laws were ratified in 1935. The Graduate Faculty's absolute charter was granted on January 17, 1941. Throughout the 1930s and during World War Two, Alvin Johnson continued his work to help scholars escape from totalitatrian-controlled European countries and find refuge at the New School and other American universities.

As of 2025, the graduate program that began as the University in Exile continues at The New School university under the university's original name, the New School for Social Research.