The company traces it roots to 1931 Lion Manufacturing which was later named Bally Manufacturing (named for its successful pinball product called the Ballyhoo. Its success at building slot machines led the company to open casinos in Atlantic City and Las Vegas.

In 1983 it purchased Health and Tennis Corporation of America in 1983 and Lifecycle exercise bike manufacturer. In 1987 was the world's largest owner and operator of fitness centers. It further expanded with the purchase of the American Fitness Centers Nautilus Fitness Centers. Included in the acquired clubs were ones connected to Vic Tanny and Jack LaLanne. The various brands were consolidated under the Bally Total Fitness brand in 1995.

In 1996 it was spun from its casino owning parent. In May 1998 it was listed on the New York Stock Exchange trading under the ticker symbol of BFT.

Bally filed for bankruptcy in August 2007, with outstanding debts of $761 million. Over the preceding ten years, its stock price had fallen from a high of approximately US$37.00 to less than $0.37 on the Pink Sheets, a plunge of over 99% of its value. It was removed from the NYSE shortly thereafter.

On October 1, 2007, Bally announced its emergence from bankruptcy court protection, 100% owned by a hedge fund, Harbinger Capital.

On December 3, 2008, Bally again filed for bankruptcy due to problems arising from a global credit crisis. The company indicated that it would explore options including reorganization or possibly even a sale, but that it hoped to emerge from bankruptcy as soon as possible.

Bally Total Fitness has been the subject of controversy over their sales and membership cancellation practices, with some customers claiming they were misled into signing long term membership contracts that can last for three years, and subsequently found themselves dealing with collection agencies.

In April 1994, Bally paid $120,000 to settle Federal Trade Commission charges of illegal billing, cancellation, refund, and debt-collection practices. But consumers complain that little has changed over the years. From 1999 to 2004, over six hundred customers complained to the New York Attorney General's office, leading to an investigation and subsequent agreement by Bally Total Fitness to reform their sales tactics in February 2004.

According to ConsumerAffairs.com, "We get so many complaints about Bally Total Fitness, it's a workout just to sort through them."

Paul Toback, a former White House aide in the Clinton administration who joined Bally as a corporate development officer in 1997, was named Chief Executive Officer (CEO) in late 2002, after predecessor Lee Hillman resigned.