It was a splinter group of the Labor Party (ALP) and was formed by Bob Heffron after he and Carlo Lazzarini attempted to depose the party leader Jack Lang (who had been Premier of New South Wales 1925-27 and again 1930-32).

Both Heffron and Lazzarini subsequently lost their party endorsements for the 1938 election.

At the 1938 election the ILP stood candidates in 6 of the 90 seats and won 3.7% of the popular vote.

Three other MLAs, Mat Davidson (Cobar), and Ted Horsington (Sturt)[5] joined the ILP in April 1939 while Frank Burke (Newtown) joined the ILP in June 1939.

Heffron and William McKell then successfully combined to depose Lang on 5 September 1939.