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Early years (1886–1910)

Arsenal were founded as Dial Square in 1886 by a group of workers employed by the Dial Square workshop at the Royal Arsenal, an armaments factory in Woolwich, south east London. They were led by a Scotsman, David Danskin, who purchased the club's first football, and amongst their number was former Nottingham Forest goalkeeper Fred Beardsley, who would later obtain a set of red kit from his old club, thus giving Arsenal the colours they still wear today.

Dial Square played their first match on December 11, 1886 against Eastern Wanderers on an open field in the Isle of Dogs, which they won 6-0. The club were renamed Royal Arsenal soon after, reportedly on Christmas Day. Royal Arsenal first played on Plumstead Common, but soon sought alternative homes. They first played at the Sportsman Ground in Plumstead and then moved to the adjacent Manor Ground in 1888. Royal Arsenal then moved to the nearby Invicta Ground in 1890, before returning to the Manor Ground three years later.

By now, Royal Arsenal had started to win local trophies, such as the Kent Senior Cup in 1890 and the London Senior Cup the year after. Arsenal also entered the FA Cup for the first time in 1889, where the gulf in quality between Arsenal and the professional sides from the North soon became apparent. In addition, Royal Arsenal faced the threat of their amateur players being lured away by the money professional sides could offer. Therefore, in 1891, the club decided to turn professional, and at the same time changed their name to Woolwich Arsenal.

Woolwich Arsenal's move to professionalism was frowned upon by many of the amateur Southern clubs, and they were banned from participating in local competitions. With friendlies and the FA Cup the only matches available for Woolwich Arsenal, they attempted to set up a southern equivalent of the Football League. The move failed and the club's future looked decidedly bleak, until the Football League came to Woolwich Arsenal's rescue by inviting them to join in 1893. Arsenal were the first Southern club to enter the League, initially joining the Second Division.

Woolwich Arsenal played in the Second Division for eleven seasons; they generally occupied mid-table before the appointment of Harry Bradshaw in 1899; Bradshaw and his star signings, including goalkeeper Jimmy Ashcroft (Arsenal's first England international) and captain Jimmy Jackson, won promotion to the First Division in 1904. However, Bradshaw moved on to Fulham before the Gunners had kicked a ball in the top flight, and despite some strong performances in the FA Cup (the club reached the semi-finals in both 1906 and 1907), they soon faded.

The chief cause of this decline was the club's ongoing financial problems; despite the boom in football during the early 20th century, the club's geographic isolation, playing in the relatively underpopulated area of Plumstead, meant attendances and thus income were low. To stay afloat, Woolwich Arsenal were forced to sell their star players (including Ashcroft, as well as Tim Coleman and Bert Freeman), and slowly started to slip down the table, which did not help their financial situation. The club were close to bankruptcy before being bought out by businessman Sir Henry Norris in 1910.