History
Lucas wanted his 1977 film Star Wars to include visual effects that had never been seen on film before. After discovering that the in-house effects department at 20th Century Fox was no longer operational, Lucas approached Douglas Trumbull, famous for the effects on 2001: A Space Odyssey. Trumbull declined as he was already committed to working on Steven Spielberg's film Close Encounters of the Third Kind, but suggested his assistant John Dykstra to Lucas. Dykstra brought together a small team of college students, artists and engineers who became the Special Visual Effects department on Star Wars. Alongside Dykstra, other leading members of the original ILM team were Ken Ralston, Richard Edlund, Dennis Muren, Joe Johnston, Phil Tippett, Steve Gawley, Lorne Peterson and Paul Huston.

In late 1978, when in pre-production for The Empire Strikes Back, Lucas reformed most of the team into Industrial Light & Magic in Marin County, California. From here on, the company expanded and has since gone on to produce special effects for nearly three hundred films, including the entire Star Wars saga, the Indiana Jones series, the Harry Potter series, the Jurassic Park series, the Back to the Future trilogy, many of the Star Trek films, Ghostbusters II, Who Framed Roger Rabbit, the Pirates of the Caribbean series, the Terminator sequels, the Transformers films, the Men in Black series, Wild Wild West, most of the Mission: Impossible films, E.T. the Extra-Terrestrial, *batteries not included, The Abyss, Flubber, and also provided work for Avatar, alongside Weta Digital.

In addition to their work for George Lucas, ILM also collaborates with Steven Spielberg on most films that he directs, and for many that he produces as well. Dennis Muren has acted as Visual Effects Supervisor on many of these films.

Apart from flashy special effects, the company also works on more subtle effects - such as widening streets, digitally adding more extras to a shot, and inserting the film's actors into preexisting footage - in films including Schindler's List, Forrest Gump, Snow Falling on Cedars, Magnolia, and several Woody Allen films.

Ironically, ILM did not embrace computer-generated imagery until the late 1980s, even though Lucasfilm proper had hired Edwin Catmull from NYIT in 1979 to begin developing a host of digital tools for filmmakers. (Note: John Lasseter never worked for ILM.) The computer graphics (CG) Group, later known as Pixar, was sold to Steve Jobs in 1987, and created the first CG animated feature, Toy Story'.' As part of that sale, a few Pixar Image Computers were placed at ILM and a pair of computer effect specialists -- George Joblove and Doug Kay --who joined specifically to spearhead the companies early CG efforts. At first they only performed the occassional wire removal, but from 1987 through 1995 they improved their capabilities and software (from retouching, to 2D animation, to 3D) and surprised the company with their work for Jurassic Park, marking ILM's move from physical effects to digital ones.

In 2000, ILM created the OpenEXR format for High Dynamic Range Imaging.

ILM operated from an inconspicuous property in San Rafael, California until 2005. The company was known to locals as The Kerner Company. In 2005, when Lucas decided to move locations to The Presidio of San Francisco and focus on digital effects, a management-led team bought the five physical and practical effects divisions and formed a new company that included the George Lucas Theater, retained the "Kerner" name as Kerner Technologies, Inc. and provided physical effects for major motion pictures, often working with ILM, until its Chapter 7 bankruptcy in 2011.

In 2005, ILM extended its operations to Lucasfilm Singapore, which also includes the Singapore arm of Lucasfilm Animation. In 2011, it was announced the company was considering a project-based facility in Vancouver.

In 2006, ILM invented IMoCap (Image Based Motion Capture Technology).

As of 2009, ILM has received 15 Best Visual Effects Oscars and 23 additional nominations. It has also received 24 Scientific and Technical Awards from the Academy of Motion Picture Arts and Sciences.

In 2012, Disney bought ILM's parent company, Lucasfilm, and acquired ILM in the process. Disney has stated that it has no immediate plans to change ILM's operations, but had begun to lay off employees by April of the next year.

ILM is currently the largest visual effects vendor in the motion picture industry, with regards to workforce, with more than 500 artists. It has one of the largest renderfarms currently available with more than 7500 nodes. Following the closure of LucasArts by Disney in 2013, ILM was left overstaffed and the faculty was reduced to serve only ILM's visual effects department.