It was founded by a group of 48 Jewish families led by Shimon Rokach, a Jerusalem pioneer of agriculture, and Aharon Chelouche, a landowner and businessman from Jaffa.

Having survived years of neglect in the 1970s, Neve Tzedek was slated for demolition, but as a result of public opposition, it was decided to restore the historic quarter, and since the 1990s it has become increasingly bohemian and fashionable.

However, plans to demolish the neighbourhood to make way for high rise apartments fell through as many buildings were declared heritage sites worthy of preservation.

[4] New establishments were housed in old buildings, most notably the Suzanne Dellal Centre for Dance and Theatre and the Nachum Gutman Museum, located in the artist's home.

[6] Opponents of this plan argued that the addition of new skyscraper-lined highways would dramatically alter the historical and social character of Neve Tzedek and its surrounding areas in southern Tel Aviv.

[6][7] Shmuel Yosef Agnon, a Nobel Prize laureate in literature, describes Neve Tzedek at the beginning of the 20th century in his autobiographical novel, Only Yesterday, translated from Tmol Shilshom (Hebrew: תמול-שלשום‎).

Another book set in Neve Tzedek is Between the Sands and the Blue Sky (Hebrew: בין חולות וכחול שמיים‎), the autobiography of the artist, Nahum Gutman.