The label was formed in the wake of a flurry of new post-punk-inspired labels forming in New Zealand in the early 1980s, in particular Propeller Records in Auckland. The intention was to record the original local music of Christchurch, but soon the label rose to national prominence by championing the emerging music of Dunedin. The Pin Group's "Ambivalence" 7" was the first release from Flying Nun, although it is widely assumed that "Tally Ho" by The Clean was the first release, as it unexpectedly reached number nineteen in the New Zealand charts, bringing the label unanticipated profile and income. This was followed by the seminal Dunedin Double, a release which cemented the place of the southern city in the forefront of New Zealand independent music. Flying Nun moved into the full-length album market in 1982 with the Ego Gratification Album by Chris Knox and Beatin Hearts by Builders. Many of the most prominent kiwi rock and alternative bands have been signed to Flying Nun at some stage in their careers. In 2000, Australian youth radio network Triple J produced a list of the thirty "Greatest New Zealand acts of all time", twenty of which were Flying Nun artists. The label has been home to various styles of music, including the much-debated Dunedin sound, "high-end pop with a twist", lo-fi experimentation, strongly Velvet Underground-influenced pop, minimalism, industrial, and rock-electronic crossover. In 1999Matthew Bannister of The Sneaky Feelings wrote Positively George Street: A Personal History of the Sneaky Feelings and the Dunedin Sound, covering the New Zealand music industry of the 1980s, including Flying Nun. In 1990 Festival Records bought a fifty percent stake in Flying Nun, and then in 2000 merged with Mushroom Records, bringing Flying Nun into the Festival-Mushroom Records family of companies. Flying Nun was acquired as part of the purchase of FMR by Warner Music Group in 2006. A consortium that included Shepherd bought back the label from Warner on 21 December 2009, for "more than what I sold it for". New Zealand musician Neil Finn, his wife Sharon, and another business partner together own a quarter-share in the repatriated record label. In 2013, American label Captured Tracks announced plans for selected reissues of Flying Nun's back catalogue. In the 2018 Queen's Birthday Honours, Shepherd was appointed an Officer of the New Zealand Order of Merit for services to the music industry.
Since the mid-1990s many of the original stable of artists have split up or moved to other labels, including Xpressway Records, Arch Hill Recordings, Powertool Records, South Indies, Paris or Matador Records. A similarly eclectic new generation of bands is signed to Flying Nun, including:
