The Formosa was founded in 1925 by 1920s prize-fighter Jimmy Bernstein. Bernstein operated his establishment initially in a Red Car trolley located just east of The Lot Studios. In 1945, Lem Quon went into partnership with Bernstein, taking full ownership in 1976 when Berstein died. The restaurant remains in the family with Quom's grandson, Vince Jung, managing it.
Generations of movie stars such as Humphrey Bogart and Clark Gable have eaten meals at The Formosa. Frank Sinatra is reputed to have spent many nights at the Formosa in the 1950s, pining over Ava Gardner.
The interior and exterior of the Formosa Cafe can be seen in the movie L.A. Confidential. Other movies shot here include The Majestic starring Jim Carrey and Still Breathing starring Brendan Fraser. In Still Breathing, Fraser's character has recurring dreams of meeting his future wife in "Formosa".