The original MS-DOS version of Kali was created by Scott Coleman and Jay Cotton in the spring of 1995. It was the successor to a program called iDOOM (later iFrag) that Scott wrote so he could play id Software's DOS game DOOM over the Internet. After the release of Descent, Scott and Jay wrote a new program to allow Descent, or any other game which supported LAN play using the IPX protocol, to be played over the Internet; this new program was named Kali. In the summer of 1995, Scott went off to work for Interplay Productions and Jay formed a new company, Kali Inc., to develop and market Kali. Jay and his team developed the first Windows version (Kali95) and all subsequent versions.

In the mid-nineties, it was an extremely popular way to play Command & Conquer, Descent, Warcraft II: Tides of Darkness, Duke Nukem 3D, and other games over the Internet. Since it was the only way for Windows and DOS users to play Warcraft II: Tides of Darkness against people outside of a LAN or dial-up connection, Blizzard actually included a copy of the program on the CD, going so far as to also provide a customized executable (WAR2KALI.EXE) which optimized the game's network code to account for Internet latency and also allowed users to specify their own settings for packet transmission and handling.

During the height of IPX emulation's popularity, a competing product called "Kahn" was being sold by the now-defunct developer Stargate Networks for $15^[1] ($5 cheaper than Kali at that time). However, Kali was already well-established by this point; existing users saw no reason to buy another piece of software, and new users were still attracted to Kali's larger user base, since the whole point of the software was to be able to play with other people. The minor cost savings proved largely ineffective against Kali, and Kahn never achieved much market share.

The market for Kali eventually dried up as games began to host their own online services, such as battle.net, MSN Gaming Zone, and also through direct TCP/IP connections, made easier by Microsoft's DirectPlay package. As IPX itself was phased out, Kali's unique emulation technology fell by the wayside and the software shifted its emphasis to becoming a game browser, a market where strong competitors such as Gamespy were already established.

In the early 2000s, Cotton decided to sell Kali to a company that would have the capital to expand the program. However, this move proved to be disastrous for Kali as the new company folded shortly after the purchase. A year later Cotton reacquired the rights to the Kali software and system. Since then he has resumed development and support of Kali.

As of 2009, the latest version of Kali is 2.613, which was released in February 2004. At present Kali works with over 400 games. Support has faded over the last years making usage of Kali harder and less effective.

Kali has gained new life, because the IPX protocol has been removed in all version of Windows after XP.

Occasional specials reduce the cost of Kali down to $10.