The origin of kretek cigarettes can be traced to the late 19th century. The creator of kretek was Haji Jamhari, a native of Kudus in Indonesia's Central Java region. Suffering from chest pains, Jamhari attempted to reduce the pain by rubbing clove oil on his chest. Jamhari sought a means of achieving a deeper relief and smoked his hand-rolled cigarettes after adding dried clove buds and rubber tree sap. According to the story, his asthma and chest pains vanished immediately. Word of Jamhari’s product spread rapidly among his neighbors, and the product soon became available in pharmacies as rokok cengkeh – clove cigarettes. First marketed as a medicinal product, kreteks became widely popular.

In those years, the locals used to hand-roll kreteks to sell on order without any specific brand, packing, or limits on ingredients used in production. A resident of Kudus named Nitisemito had the idea of starting serial production and selling kreteks under a proprietary brand name. Unlike other manufacturers, Nitisemito, who first created the Bal Tiga brand in 1906, enjoyed great success by implementing unprecedented marketing techniques, such as using embossed packs or offering free-of-charge promotional materials. Commercial manufacture did not start in earnest until the 1930s.

Furthermore, he also developed a means of production system called the abon system and which offered opportunities for other entrepreneurs without enough capital. In this system, a person called an "abon" assumes the job of delivering finished products to the company which pays the price of piecework done whereas the company is liable to supply the necessary production materials to the "abons". However, most manufacturers have since opted to have their workers working under the roof of their own factories, to maintain quality standards. Nowadays, only a few kretek manufacturers make use of the abon system.

During the period from 1960 until 1970, kreteks became a national symbol against "white cigarettes". In mid 1980’s, the number of machine-produced cigarettes exceeded that of hand-rolled ones. One of the largest income sources of Indonesia, the kretek industry comprises 500 large and small manufacturers employing a total of around 10 million people.

The quality and variety of tobacco play an important role in kretek production. One kretek brand can contain more than 30 types of tobacco.[7] Minced dried clove buds weighing about 1/3 of the tobacco blend are added. Sometimes, the last process which machine-made or hand-rolled kreteks go through is the spraying of sweetener at the butt end of the cigarette.