The holiday, which began as a Pennsylvania German custom in southeastern and central Pennsylvania in the 18th and 19th centuries, has its origins in ancient European weather lore, wherein a badger or sacred bear is the prognosticator as opposed to a groundhog. The holiday also bears some similarities to the medieval Catholic holiday of Candlemas. In addition, it resembles the Pagan festival of Imbolc, the seasonal turning point of the Celtic calendar, which is celebrated on February 1 and also involves weather prognostication.

For early Christians in Europe, Candlemas was a day to bless and distribute candles. It was at the mid-point between the Winter Solstice and the Spring Equinox.  Early Christians decided that clear skies on Candlemas Day meant a longer winter was ahead, while a cloudy day foreshadowed the end of winter.  According to the English version:

If Candlemas be fair and bright,
Winter has another flight.
If Candlemas brings clouds and rain,
Winter will not come again.

In 1723, the Delaware Indians settled Punxsutawney, Pennsylvania.  It was a campsite halfway between the Allegheny and the Susquehanna Rivers. The name Punxsutawney comes from the Indian name for the location "ponksad-uteney" which means "the town of the sand flies." When the Germans came to America in the 1700s and settled in Pennsylvania, they brought their tradition of Candlemas and introduced the tradition of an animal seeing its shadow into the prediction of the weather on that day.  In Germany, a badger had been used, but a suitable replacement in America was the groundhog.

In 1886, Clymer H. Freas, city editor of the Punxsutawney Spirit Newspaper was inspired by a local tradition of hunting and barbecuing groundhogs and dubbed the participants the Punxsutawney Groundhog Club. Using his editorial clout, he proclaimed Punxsutawney Phil, the local groundhog, to be the one and only official weather forecasting groundhog.  He issued this proclamation on, appropriately enough, Groundhog Day, February 2nd.  Punxsutawney Phil's fame began to spread, and newspapers from around the globe began to report Punxsutawney Phil's Groundhog Day predictions. Today, over 20,000 fans come to Punxsutawney, Pennsylvania on Groundhog Day.