The school of medicine was founded by Dr. John Morgan, a graduate of the College of Philadelphia (the precursor of the University of Pennsylvania) and the University of Edinburgh Medical School. After training in Edinburgh and other European cities, Dr. Morgan returned to Philadelphia in 1765. With fellow University of Edinburgh Medical School graduate Dr. William Shippen Jr., Morgan persuaded the college's trustees to found the first medical school in the Original Thirteen Colonies. Only months before the medical school was created, Morgan delivered an address to the trustees and the citizens of Philadelphia, "Upon the Institution of Medical Schools in America" during which he expressed his desire for the new medical school to become a model institution:

That autumn, students enrolled for "anatomical lectures" and a course on "the theory and practice of physick." Modeling the school after the University of Edinburgh Medical School, medical lectures were supplemented with bedside teaching at the Pennsylvania Hospital.

The School of Medicine's early faculty included nationally renowned physicians and scientists such as Benjamin Rush, Philip Syng Physick, and Robert Hare. In the mid-1800s, prominent faculty members included William Pepper, Joseph Leidy, and Nathaniel Chapman (founding president of the American Medical Association). William Osler and Howard Atwood Kelly, two of the "founding four" physicians of The Johns Hopkins Hospital were drawn from Penn's medical faculty. Later, in 1910, the landmark Flexner Report on medical education reviewed Penn as one of the relatively few medical schools of the era with high standards in medical instruction, facilities, and research.