The original Cat's Cradle was opened in 1969 by Marcia Wilson and two partners, Mike Cross and Larry Reynolds. Located in a basement about a half mile from the current location, the original venue was significantly smaller, with a capacity of around two dozen people. The club relocated and changed ownership several times, and went bankrupt in 1983 due to unpaid taxes. In 1987 the club was sold to the current owner, Frank Heath. After a six-month hiatus in 1993, Cat's Cradle moved to its current location at 300 E. Main Street in Carrboro. In recent years, an additional even smaller club next door called Cat’s Cradle Back Room was opened.

In the early 1990s, the club contributed to the Chapel Hill region being called the "Next Seattle" by the music press, given the hosting of upcoming regional and national alternative and grunge acts such as Nirvana (who last performed there just 10 days after the release of Nevermind), Pearl Jam, Sonic Youth, The Smashing Pumpkins, and Ween (who documented their December 9, 1992, performance with At the Cat's Cradle, 1992). In later years, the venue also saw performances by John Mayer, Iggy Pop, Sonic Youth and Joan Baez.