X-Factor is a private organization whose publicly stated purpose is to investigate reports of activity by superhuman mutants, to hunt down and to capture those mutants, and to prevent those mutants from presenting any further threat to normal human beings. However, X-Factor's secret true purpose is to locate superhuman mutants who are or might become victims of persecution by normal humans beings, to train these mutant in controlling their superhuman powers effectively, so that they will not prove dangerous to themselves or to others, and so that the mutants can better protect themselves, and then to reintroduce these mutants into human society. Having learned how to control their superhuman abilities, these mutants will theoretically be better able to conceal those powers, and thus to pose as normal human beings.

The five founding members of X-Factor are themselves superhuman mutants: Warren Worthington III, known as the Angel; Henry P. McCoy, the Beast; Scott Summers, Cyclops; Robert Drake, the Iceman; and Jean Grey, known as Marvel Girl. These five individuals were the original members of the team of superhuman mutants called the X-Men. Professor Charles Xavier, the founder of the X-Men, brought the five original members together when the latter were adolescents in order to train them in proper use of their superhuman abilities and to have the five mutants use these powers to combat criminal superhuman mutants and other menaces to humanity. These five X-Men eventually all left the team and are now adults. One of the original X-Men, Jean Grey, was nearly killed by intense radiation aboard a space shuttle. A being of primal energy called the Phoenix adopted Grey's form and persona while placing Grey's original body in a strange cocoon-like construct, within which Grey's original body existed in suspended animation, slowly healing.

After Grey's emergence from the "cocoon" years later, she was reunited with her four fellow members of the original X-Men. Grey was shocked to learn that anti-mutant prejudice had increased during the time she spent in suspended animation, that Xavier had disappeared, and that the original X-Men's greatest enemy, Magneto, had taken over Xavier's School for mutants and was working in close cooperation with the current members of the X-Men. Actually, Xavier had been taken to the Shi'ar Galaxy to be healed of severe injuries, and Magneto had recently reformed, although the original X-Men nevertheless remain suspicious of him. Grey believed that she and the other original X-Men must do something to carry on Xavier's heritage, which she believed that the current X-Men, having allied themselves with Magneto, would not do.

Believing Grey to be right, Warren Worthington III, the multimillionaire head of Worthington Enterprises, founded the X-Factor organization. Worthington was the founder of the organization through Worthington Enterprises, but he concealed the extent of the involvement of himself and his company with X-Factor from public knowledge. X-Factor headquarters was a complex along the Hudson River on Manhattan's West Side; however, the organization will operate anywhere in the world, and has even conducted an operation in the Soviet Union. Worthington hired Cameron Hodge as X-Factor's Director of Public Relations. Hodge is aware of the purpose for which Worthington and his four colleagues intend X-Factor, but his job has been to create its public image as an organization dedicated to eliminating the so-called Mutant menace," an image he created through television commercials and other means.

Drake, Grey, McCoy, Summers, and Worthington became the principal members of X-Factor, with Summers serving as the team leader. Presumably McCoy and Worthington do not use their true names when dealing with the public as members of X-Factor, since it is public knowledge that Warren Worthington III is the Angel and Henry P. McCoy is the Beast.

Repeatedly, since the founding of X-Factor, its five principal members have found themselves going into action in their costumed identities, using their superhuman powers. It is, of course, essential to X-Factor's cover story about its purpose that the general public be unaware that the principal "mutant-hunters" of X-Factor are themselves mutants. X-Factor took the opportunity of an attack on their headquarters by the mutants Bulk and Glow Worm to make it appear that the original X-Men and the five X-Factor agents were appearing together simultaneously. Cyclops, the Beast, and Iceman, in their costumed identities, pretended to aid Bulk and Glow Worm, while Grey, Worthington, Hodge, and their friends Rusty Collins and Vera Gantor, all dressed in X-Factor uniforms, pretended to fight all of them. The public assumed that Hodge, Collins, and Gantor were actually the three other main X-Factor agents. In their costumed identities, Drake, Grey, McCoy, Summers and Worthington are now known as the X-Terminators, and are publicly believed to be opponents of X-Factor's activities.

Among the superhuman mutants whom X-Factor has aided so far are "Boom Boom," a mutant who can generate explosive energy "bombs," Rusty Collins, who is a pyrokinetic, able to create flame without himself being harmed, Arthur "Artie" Maddicks, a small boy with psionic powers, most notably the ability to create images of distant events, and Skids, a Morlock who surrounds herself with a force field.

X-Factors methods have inspired great controversy, with many, including various superhuman mutants, believing the X-Factor's publicity for its operations actually increases the extent of dangerous anti-mutant prejudice in the nation. Freedom Force, an organization of formerly criminal superhuman mutants who now work for the United States government, were assigned to arrest Rusty Collins, nut were prevented from taking him into custody by the X-Terminators. Realizing that the X-Terminators were the original X-Men, Freedom Force's leader Mystique, investigated and discovered the Warren Worthington, the Angel, was X-Factor's financial backer. She then leaked this information to the news media, thereby creating a scandal: the famous mutant-hunting organization was thus revealed to be financed by a known superhuman mutant.