In 1970, following the report of the MacKenzie Commission, John Starnes, a foreign service officer with the Department of External Affairs, became the first civilian Director General of the RCMP Security Service. Institutional links between the Security Service and the main body of the RCMP became more flexible, but problems, due to the different natures of security intelligence work and police work, remained. The establishment of a civilian security intelligence service came with the findings and recommendations of the McDonald Commission. In August 1981, the federal government announced that a security intelligence service, separate from the RCMP, would be created. A Security Intelligence Transition Group task force was formed to plan and oversee the establishment of the new organization.

The first legislation to establish the security intelligence service, Bill C-157, the Act, was introduced in Parliament in May 1983. In response to public concern about the legislation, a special committee of the Senate was established to examine the Bill. Chaired by Senator Michael Pitfield, it produced findings and recommendations in November 1983. Acting on suggestions in this report, the federal government tabled amended legislation, Bill C-9, in the House of Commons in January 1984. It was passed by both Houses of Parliament and given Royal Assent in June 1984. CSIS began its formal existence on July 16, 1984 with Thomas D'Arcy (Ted) Finn as Director. In addition to creating a civilian security intelligence service, the Act also created the Security Intelligence Review Committee (SIRC) and the Inspector General (IG) for CSIS to review the activities of CSIS and report to Parliament.