Some time prior to about 1560, graphite was discovered near Borrowdale, England, supposedly when a large tree was uprooted in a storm, exposing a black substance beneath its roots. The usefulness of graphite as a marking substance was quickly realized. Though the exact date is not known for certain, the year 1565 marks the first record of a pencil consisting of a piece of graphite inserted into a wood shaft, making the first ancestor of today's pencil.

Since graphite was discovered in England, it is most likely that the first pencils were made in England, though this is not known for certain. The pencil was further developed by European craftsmen.

It is not known who invented the first pencil. The pencil was first documented in 1565 by Conrad Gesner, and its invention is sometimes attributed to him, though this is unlikely. European craftsman (woodworkers) were the first known pencil manufacturers, and it wasn't until the late 1700's that manufacturing techniques similar to those practiced today were developed.