Citizen opposition to the routing of I-40 through Overton Park in the central part of Memphis resulted in I-40 being rerouted onto what was originally the northern loop of I-240 in 1981.

I-240 begins as a north–south route in Midtown Memphis east of downtown at a directional T interchange with I-40, which shifts from an east–west to a temporary north–south alignment here.

Shifting slightly to the west, I-240 continues southward, crossing a railyard and passing next to Elmwood Cemetery before reaching a cloverleaf interchange with South Parkway about 2.5 miles (4.0 km) later.

A short distance later, I-240 has a partial cloverleaf interchange (parclo) with the northern terminus of SR 176 (Getwell Road).

Over the next three miles (4.8 km), I-240 runs along the northern bank of Nonconnah Creek, shifting east-northeast before reaching an interchange with the western terminus of SR 385 (Bill Morris Parkway), a controlled-access spur that serves the southeastern suburbs of Memphis, where it briefly reduces to six lanes.

The highway then turns and proceeds north, expanding back to eight lanes, and reaches an unusually configured interchange with US 72 (Poplar Avenue) a short distance later.

Continuing almost directly north, the freeway reaches a parclo interchange with Walnut Grove Road (the unsigned western terminus of SR 23) almost two miles (3.2 km) beyond this point.

I-240 then gradually shifts northwest and reaches its northern terminus almost two miles (3.2 km) later at a four-level stack interchange with I-40, Sam Cooper Boulevard, and US 64/US 70/US 79 (Summer Avenue) in East Memphis.

I-240 was first planned in 1955 as a 30.8-mile (49.6 km) beltway that would completely encircle midtown Memphis, with the exception of the segment between I-40 and I-55, which was initially designated as I-255.

[3] They also founded an activist group called Citizens to Preserve Overton Park, and waged a multiyear legal battle, which culminated in the US Supreme Court ruling in their favor in 1971.

[5] On January 9, 1981, then-Governor Lamar Alexander submitted a request to the then-Secretary of Transportation Neil Goldschmidt to cancel the route through Overton Park, which was approved seven days later.

[10] The section between Walnut Grove Road and the interchange with I-40 and Sam Cooper Boulevard, along with the short segment of I-40 north to US 64/US 70/US 79 (Summer Avenue), which was then part of I-240, was dedicated on October 9, 1963, and opened 14 days later.

[17] The cancelation of the section of I-40 through Overton Park rendered both interchanges with I-240 inadequate to handle the unplanned traffic patterns, thus necessitating their reconstruction.

[19][21] A two-lane flyover was constructed to carry I-40 eastbound traffic through the interchange, replacing a one-lane ramp with a slow design speed.

This included adding one throughlane in each direction and a redesigning of the US 72 (Poplar Avenue) interchange, as well as new retaining walls and noise barriers.

[29] On December 23, 1988, a tanker truck hauling liquefied propane crashed at the interchange between I-40 and the western terminus of I-240 and exploded, producing a massive fireball that enveloped the Interstate and started multiple structural fires.