The club was founded in 1983, in the San Francisco apartment of John Rothmann, who, though a speechwriter for former President Nixon, has been a registered Democrat since the 1970s. "The logic was very clear. There was a Chinese Democratic club and a black Democratic club and a Latino Democratic club, so why shouldn't there be a Jewish Democratic club?" said Rothmann, who is currently a talk-show host on KGO Radio.

At that time grassroots organizing was a growing phenomenon and for the first time ethnic communities were gaining strength. Local San Francisco Jewish political activists thought it was critical that Jews not be left behind.

In its earliest months, the club was named after Rothmann's great-uncle, Henry Ulysses Brandenstein, who had been, for some time, the last Jewish Democrat on the San Francisco Board of Supervisors. Early debates about the name of the club emphasized the importance of not having a Jewish name, particularly in partisan politics. It wasn't long before the organizers decided to change the name to honor Raoul Wallenberg, the Swedish diplomat and Righteous Gentile who saved thousands of Hungarian Jews during World War II.

Some of the early work of the Wallenberg Club in the early '80s involved fighting the recall effort against then-Mayor Dianne Feinstein, and later, working with the LGBT community and then-Supervisor Angela Alioto to co-sponsor an anti-hate crime law.