Edward J. O'Brien (1890-1941) was editor of the annual Best Short Story collections and was interested in establishing a magazine devoted solely to short fiction. He found that many magazine editors turned down short stories they considered too unusual or experimental, and he therefore wanted to provide an outlet to newer authors, as well as another source for stories for his annual anthology.

O'Brien assembled an editorial board of six literary figures: O'Brien himself, H.E. Bates (1905-1974), Arthur Calder-Marshall (1908-), Hamish Miles (1894-1937), Geoffrey West (1900-), and Leonard Arthur Pavey (1888-1961?). Pavey had been wounded in World War I and was writing stories for several publications that included Criterion, Life and Letters, and Adelphi.

Basil Blackwell of Oxford underwrote the first three issues of New Stories, and the first issue came out in February/March 1934 with two thousand copies printed. Though the magazine had high circulation, contributing authors could not be paid and the editors worked for free. Contributors in the first year included Dylan Thomas, John Lehmann, Stephen Spender, and H. A. Manhood, among many others. The bimonthly magazine completed its publishing with two volumes, ending in the spring of 1936.