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MontaVista was founded by James F. Ready, an acknowledged pioneer in the off-the-shelf operating-systems business with more than 25 years of experience in the embedded-software industry. While at Ready Systems in the early 1990s, he foresaw that Linux would become an important factor in the embedded market. The Ready Systems merger with Microtec Research and subsequent acquisition, in 1995, by Mentor Graphics afforded Jim Ready the opportunity to pursue his vision with the creation of MontaVista.

MontaVista is headquartered in Santa Clara, California, in the heart of Silicon Valley. The name MontaVista Software comes from the company's first location, in Monta Vista, an unincorporated area in Cupertino, CA.