The origins of the modern Cincinnati Reds can be traced to the expulsion of an earlier team bearing that name. In 1876, Cincinnati became one of the charter members of the new National League, but the club ran afoul of league organizer and long-time president William Hulbert for selling beer during games and renting out their ballpark on Sundays. Both were important activities to entice the city's large German population. While Hulbert made clear his distaste for both beer and Sunday baseball at the founding of the league, neither practice was actually against league rules in those early years. On October 6, 1880, however, seven of the eight team owners pledged at a special league meeting to formally ban both beer and Sunday baseball at the regular league meeting that December. Only Cincinnati president W. H. Kennett refused to sign the pledge, so the other owners formally expelled Cincinnati for violating a rule that would not actually go into effect for two more months.
Cincinnati's expulsion from the National League incensed Cincinnati Enquirer sports editor O. P. Caylor, who made two attempts to form a new league on behalf of the receivers for the now bankrupt Reds franchise. When these attempts failed, he formed a new independent ballclub known as the Red Stockings in the Spring of 1881, and brought the team to St. Louis for a weekend exhibition. The Reds' first game was a 12–3 victory over the St. Louis club. After the 1881 series proved a success, Caylor and a former president of the old Reds named Justus Thorner received an invitation from Philadelphia businessman Horace Phillips to attend a meeting of several clubs in Pittsburgh with the intent of establishing a rival to the National League. Upon arriving in the city, however, Caylor and Thorner discovered that no other owners had decided to accept the invitation, with even Phillips not bothering to attend his own meeting. By chance, the duo met a former pitcher named Al Pratt, who hooked them up with former Pittsburgh Alleghenys president H. Denny McKnight. Together, the three men hatched a scheme to form a new league by sending a telegram to each of the other owners who were supposed to attend the meeting stating that he was the only person who did not attend and that everyone else was enthusiastic about the new venture and eager to attend a second meeting in Cincinnati. The ploy worked, and the American Association was officially formed at the Hotel Gibson in Cincinnati with the new Reds a charter member with Thorner as president.
Led by the hitting of third baseman Hick Carpenter, the defense of future Hall of Fame second baseman Bid McPhee, and the pitching of 40-game-winner Will White, the Reds won the inaugural AA pennant in 1882. With the establishment of the Union Association Justus Thorner left the club to finance the Cincinnati Outlaw Reds and managed to acquire the lease on the Reds Bank Street Grounds playing field, forcing new president Aaron Stern to relocate three blocks away at the hastily built League Park. The club never placed higher than second or lower than fifth for the rest of its tenure in the American Association.