Disney Brothers' Studio, founded by Walt and Roy Disney in 1923, had made a distribution deal with New York film distributor Margaret Winkler for more live-action/animated shorts based upon Alice's Wonderland, which he had started making while in Kansas City with his close friend Ubbe Iwerks, but never got to distribute.

The new series, Alice Comedies, had been reasonably successful, and by the time the series ended in 1927, the focus was more on the animated characters, in particular a cat named Julius who resembles Felix the Cat, rather than the live-action Alice.

By 1927, Charles B. Mintz had married New York film distributor Margaret Winkler and assumed control of her business, and ordered a new all-animated series to be put into production for distribution through Universal Pictures.

The new series, Oswald the Lucky Rabbit, was an almost instant success, and the character, Oswald—drawn and created by Iwerks—became a popular figure.

The Disney studio expanded, and Walt hired back Fred Harman, Rudolph Ising, Carman Maxwell, and Friz Freleng from Kansas City.

In February 1928, Disney goes to New York to negotiate a higher fee per short from Mintz and is shocked when Mintz announces that not only he wants to reduce the fee he pays Disney per short but also that he has most of his main animators, including Harman, Ising, Maxwell, and Freleng (notably, except Iwerks, who refuses to leave Disney) under contract and will start his own studio if Disney does not accept the reduced production budgets.

Universal, not Disney, owns the Oswald trademark, and can make the films without Disney.

Disney, declining Mintz's offer, loses most of his animation staff.

After losing the rights to Oswald, Disney feels the need to develop a new character to replace him.

He bases the character on a mouse he had adopted as a pet while working in a Kansas City studio.

Iwerks reworks on the sketches made by Disney so that it is easier to animate it.

However, Mickey's voice and personality is provided by Disney.

The studio’s animated cartoon feature Steamboat Willie, the first Mickey Mouse sound cartoon (Mickey had appeared in two earlier cartoons, Plane Crazy and The Gallopin' Gaucho) premieres at New York's 79th Street Theatre in November 1928.

It is also the first Disney cartoon to feature synchronized sound.

Disney uses Pat Powers' Cinephone system, created by Powers using Lee De Forest's Phonofilm system without giving De Forest any credit.

Steamboat Willie--the title is a parody of the Buster Keaton film Steamboat Bill Jr.--is the first animated short feature film with a completely post-produced soundtrack of music, dialogue, and sound effects, although other cartoons with synchronized soundtracks had been exhibited before, notably by Max Fleischer's series Song Car-Tunes made in DeForest Phonofilm starting in May 1924, including My Old Kentucky Home (1926), and Paul Terry's Dinner Time, released September 1, 1928.