In June 1913, the Indiana University Board of Trustees authorized the establishment of a Department of Home Economics. Mabel Thatcher Wellman was appointed Chairwoman of the department. Elizabeth Sage, after whom IU's Sage Costume Collection is now named, was added to faculty in 1913. According to the 1914 catalogue, the objectives of the department were to "meet the need of two classes of students: of those who wished to study the principles and processes involved in the science and art of homemaking, and of those who wished to prepare to teach Home Economics in the schools."

The department also ran a practice Home Management house, which served as a practical laboratory for students to practice running a house on their own. Edith Williams organized the first house in 1920. The responsibilities for the girls who lived at the house were divided into several parts: student manager, main cook, salad and dessert cook, general kitchen upkeep, cleaning and care of the house, and baby director. Most of the time, a baby (usually the child of a faculty member) lived at the house full-time, sometimes for as long as two semesters. Students would live in the house for eight weeks at a time. The house remained active until at the least of the end of the 1960s.

On January 31, 1987, the Board of Trustees approved changing the name of the department to "Department of Apparel Merchandising and Interior Design."