This paper draws on the cultural-materialist paradigm articulated by Raymond Williams to offer a radical historicisation of identity and identity-politics in capitalist societies. A keywords analysis reveals surprisingly that identity, as it is elaborated in the familiar categories of personal and social identity, is a relatively novel concept in Western thought, politics and culture. The claim is not the standard one that people’s ‘identities’ became more important and apparent in advanced capitalist societies, but that identity itself came to operate as a new and key mechanism for construing, shaping and narrating experiences of selfhood and grouphood in this period. From a cultural-materialist perspective, the emergence and evolution of this idea of identity can only be properly understood in relation to the social contexts of its use, namely, the new contexts of consumption of capitalist societies, and the development of new forms of group-based struggle from the 1960s. What the analysis shows is that it was the commercialisation and politicisation of older essentialist understandings of selfhood and grouphood in these contexts that has given rise to the concepts of personal and social identity as we know them today. By exploring the material conditions that have given rise to the contemporary powerful attachment to ‘identity’, this paper offers a new point of departure from which to pursue many issues of concern to critical theorists and radical activists today, including the conflict over identity politics in radical circles, the historical and social processes behind their development and at least partial co-option, and their relation to neoliberal political-economic formations today.