The Foundation was established in 1981 under the terms of an agreement among environmental groups, government regulatory agencies, and utility companies seeking the constructive resolution of a long series of legal controversies concerning the environmental impacts of power plants on the Hudson River. Its principal endowment, the Hudson River Fund, was created in recognition of the critical need for an independent institution to sponsor scientific research and education programs that would contribute to the development of sound public policy concerning the River's ecosystem. The Fund has enabled the Foundation to award over 450 grants totaling approximately $30 million through 2004.

In addition, HRF has developed a significant internal program designed to bring scientific understanding to bear on public policy. This function, which includes an internal research program, addresses the interface between science and management of the Hudson’s ecological resources. To a large extent, the internal program is linked to two comprehensive management initiatives, the federally sponsored New York/ New Jersey Harbor Estuary Program (HEP) focused on the lower River, New York Harbor, and the New York Bight, and the New York State Hudson River Estuary Management Program (HREMP), which is primarily concerned with the rest of the estuary. Both programs have produced final management strategies that are now in the implementation phase.

HRF's role was expanded in 1985 by the establishment of the Hudson River Improvement Fund (HRIF) within the Foundation through an agreement with New York State which provided the initial HRIF endowment of $1.5 million. HRIF’s purpose is to support projects (especially those requiring capital construction, development, or improvement) to enhance public use and enjoyment of the River's natural, scenic and cultural resources. Since its inception, the Improvement Fund has awarded over 480 grants totaling more than $4.5 million.

At the end of 1994, the Foundation established a third fund, the New York City Environmental Fund (NYCEF), to foster "restoration, care, public enjoyment of, and education about New York City's natural resources." An initial endowment of $5 million was provided by the Consolidated Edison Company under the terms of an agreement resolving a series of natural resources damage claims by the New York State Department of Environmental Conservation. To date, NYCEF has awarded over 500 grants, totaling more than $7 million.