It operated mainly in two areas: between California and the Pacific Northwest and on a cross-country route between San Francisco and New York.

[7] Founded in 1971 by Lester Rall[1][8] (born c.1940)[1] with a single Volkswagen bus,[1] the service was originally known as the Traveling Magical Universe[9] and operated only along the Pacific Coast.

[9] In addition to its low fares, about half those of Greyhound, another feature that attracted some riders was the casual atmosphere found on the Grey Rabbit and other "hippie bus" lines of the 1970s, in which conversation and interaction between riders who were strangers before boarding was welcomed in a way not commonly seen on conventional long-distance bus services.

[3] In June 1981, the ICC granted Grey Rabbit a temporary permit, and Lester Rall attempted to obtain a permanent one.

[1] Meanwhile, in 1981, the company was operating only between San Francisco and Seattle, no longer cross-country, and its fleet of buses numbered five, all about 25 years old.

[1] Federal deregulation of long-distance bus service in 1982 reduced or removed the remaining restrictions on the company's ability to operate legally.

The U.S. deregulation of airlines that was put into effect in the late 1970s led to major reductions in prices for air travel.