The Magic were one of the four new expansion franchises awarded by the NBA in 1987 along with the Charlotte Hornets, Miami Heat and Minnesota Timberwolves. Initially, the NBA was planning to expand by three teams, with one franchise going to Florida; however, when both Miami, and Orlando ownership groups made successful pitches, the expansion committee decided to expand by four teams, allowing both to have a franchise. The Magic became the first ever major-league professional sports franchise in the Orlando area, following an expansion fee of reportedly $32.5 million. The Magic hired Matt Guokas as the team’s first coach, who helped the Magic select twelve players in the NBA Expansion Draft on June 15, 1989. On June 27, 1989, the Magic chose Nick Anderson with the 11th pick in the first round, who became the first draft pick of the franchise.

The Magic history was changed on May 17, 1992, when the franchise won the first pick in the 1992 NBA Draft Lottery. The Magic selected big-man Shaquille O’Neal from Louisiana State University, the biggest prize in the draft since the Knicks won Patrick Ewing. O’Neal, a 7-foot 1 inch center, made an immediate impact on the Magic, leading the club to a 41–41 record. The Magic again became the NBA’s most improved franchise, as they improved by 20 games. O’Neal was the first rookie to be voted an All-Star starter since Michael Jordan in 1985. He also became the 1992–1993 NBA Rookie of the Year. Despite O’Neal’s presence, the Magic missed the 1993 NBA Playoffs because they were tied with the Indiana Pacers for the eighth and final playoff spot in the Eastern Conference with the Pacers holding the tiebreaker.

In the 1996 offseason, O’Neal left as a free agent to the Los Angeles Lakers, dealing a huge blow to the Magic franchise. In the middle of the season, urged by player discontent, management fired coach Brian Hill and named Richie Adubato as interim coach for the rest of the season. Under Adubato, the Magic went 21–12 to compile a 45–37 record, led by Penny Hardaway. In the playoffs, the Magic quickly fell 0–2 to the heavily favored Miami Heat in the first round, but Hardaway battled back with consecutive 40 point games to assure a game five (the first player to do so), which the Magic ultimately lost.

With the number one draft pick, the Magic selected high-school phenomenon and future All-Star and franchise cornerstone Dwight Howard and traded for point guard Jameer Nelson. Nelson, who most scouts speculated to be a top-10 pick, fell to the 20th pick, and the Magic traded a future first-round draft pick to the Denver Nuggets for Nelson.

The team’s new state of the art home arena, the Amway Center officially opened on October 1, 2010. The Orlando Magic hosted their first preseason game at Amway Center on October 10 against the New Orleans Hornets. The 2010 – 2011 regular season home opener was on October 28 against the Washington Wizards, and the Magic won both games.

On August 9, 2012, ESPN reported that a four-team trade would send Dwight Howard to the Los Angeles Lakers. ESPN.com’s Marc Stein was told the Lakers were to acquire Howard, Chris Duhon and Earl Clark, the Denver Nuggets were to acquire Andre Iguodala, the Philadelphia 76ers were to acquire Andrew Bynum and Jason Richardson, and the Magic were to acquire Arron Afflalo, Al Harrington, Nikola Vucevic, Maurice Harkless, Josh McRoberts, Christian Eyenga, and five total protected future three first-round, two second-round picks from each of the other three teams. The deal was officially confirmed and completed on August 10. Howard left the Magic as their All-Time leading scorer, shot blocker, and rebounder.