The label was founded in 1981 initially to release singles produced by Arthur Russell under his various dance aliases.

The label's roster would eventually include Mantronix, Just-Ice, Nice & Smooth, T La Rock, EPMD and Stezo; freestyle vocalists Nocera and Kariya ("Let Me Love You for Tonight"); and R&B singer-songwriter Joyce Sims.

[1] Kurtis Mantronik, in addition to being the musician of the hip-hop duo Mantronix, worked for the label in an A&R capacity.

[citation needed] After folding in 1992, the Sleeping Bag catalog sat in limbo for several years.

In 1996, the label and its catalog were purchased by Warlock Records, which has since been re-releasing its titles with the Sleeping Bag and Fresh logos alongside the Warlock Records logo.