The existence of the minor league system is partly due to major league baseball's ability to include a reserve clause in the contracts with minor league baseball players which gives a major league team exclusive rights to a player even after the contract has expired. This is possible in baseball because of a 1922 US Supreme Court decision which grants baseball a special immunity from antitrust laws.

Minor leagues associated with Major League Baseball are classified by level of play. Currently, the most experienced and skilled minor leaguers play in the 'AAA'-level ("Triple A") leagues, the International League and the Pacific Coast League. Major League players often move to AAA affiliates during a slump caused by injury or a change in the major league team's lineup. For this reason, AAA is often thought of as the Major 'minor league' and its teams are usually in the biggest cities in the U.S. and Canada not served by Major League Baseball.

Even so, until about 1925, many minor league teams operated largely independently of any major league influence. Some teams in the higher minor leagues actually outdrew some major leagues teams and had players who made more money than some major leaguers. Many baseball writers of that time regarded the greatest of the minor league stars, such as Buzz Arlett, Jigger Statz, Ike Boone and Frank Shellenback, as equal to some major league stars.

It wasn't until after the 1925 season that the minor leagues began to be fully subordinated to the majors. Following that season, the majors and minors signed an agreement allowing any player on a minor league roster to be purchased for $5,000 from his minor league team. This power was leveled primarily at the Baltimore Orioles, then a Triple-A team that had dominated the minors for years with stars such as Babe Ruth and Lefty Grove because owner Jack Dunn refused to sell them to the majors for years.

Branch Rickey is credited with developing the first modern "farm system" in the 1920s. Under a farm system, major league teams own or have working relationships with minor league teams, and then stock those teams with prospects and reserve players, who can then be reassigned (to the major league team, or to another club in the farm system) at the discretion of the major league club. Today, every major league franchise has a farm system and only a few minor leagues operate independently of major-league influence.