[17] Many of the early artists for Fat Possum were picked[18] with the aid of Palmer (previously a teacher of Johnson at the University of Mississippi), who also produced a number of records for the label.

Fat Possum’s early releases were critically acclaimed, particularly Junior Kimbrough's album All Night Long, which received 4 stars from Rolling Stone and the loud approval of Iggy Pop.

Word of mouth and artist compilations, such as Not the Same Old Blues Crap 3 (with a cover illustration by Joe Sacco)[21] and All Men Are Liars, gradually pulled Fat Possum out of the red, even if only for brief periods of time.

A legal fight with Capricorn Records, who were to be their distributor, drained Fat Possum's funds and left a number of projects on the shelf.

Having released two albums, he teamed with The Jon Spencer Blues Explosion for a tour, and then recorded with the band A Ass Pocket of Whiskey, which helped Burnside and Fat Possum gain wider recognition.

Concluding that further searches for rural talent are hopeless,[26][27] it has begun to broaden its base of artists and sign a range of younger, indie rock bands like Andrew Bird, Milk Music, MellowHype, the Heartless Bastards, Deadboy & the Elephantmen, Wavves, Youth Lagoon, The Walkmen, Temples, Yuck, Fat White Family, The Districts, Crocodiles, Bass Drum of Death, and Soccer Mommy.

They have tapped into the indie-folk scene, releasing Verbena's frontman A.A. Bondy's solo records, The Felice Brothers, and female songwriter Lissie.

In 2017 Fat Possum partnered with founding Gorilla vs. Bear blogger Chris Cantalini to start new label Luminelle Recordings.