The steel guitar, a little-explored string instrument, is practically a requirement in western swing bands. It is easily identified by its characteristic note-bending and glissandi, and in the hands of a gifted player, it is capable of an incredible variety of effects. Those who have seen western swing bands in live performance realize that the steel guitar looks different from standard guitars and is played by a combination of finger-picking and sliding a metal bar along the strings. But few observers grasp the enormity of the task involved in mastering the instrument, both technically and in terms of its potential for effects.

The steel guitar originated in Hawaii as a variant of the Spanish guitar, which was introduced by Mexican cattle herders around 1830. The Hawaiians converted the Spanish guitar to their own musical tastes. First, the tuning was adjusted to an open, or "slack key," tuning so that the strings correlated with the notes of a major triad. Then Hawaiian guitarists laid the standard instrument flat across their knees and used objects such as combs or knives to slide along the fret board and produce the glissandi common to Hawaiian music. Thus was the Hawaiian guitar born.

The Hawaiian-guitar style of playing was popularized in the United States by touring Hawaiian groups around the time of World War I. American folk musicians, primarily rural blues men, had developed a related method of sliding knives or bottlenecks along the fingerboards of their standard guitars in order to obtain a wailing sound. Thus, the gliding and bending style of Hawaiian guitarists was familiar to southern listeners, but the positioning of the guitar flat in the player's lap was a new approach. The Hawaiian guitar was quickly absorbed into country music, becoming a fixture in the Southwest by the late 1930s and gaining popularity in the Southeast as well. Author Charles T. Brown, in characterizing the country and western tradition, states: "The steel guitar is one of the most important instruments in country music; often the character of the country sound is defined by the steel guitar."

Quick to capitalize on the growing popularity of the Hawaiian guitar, U.S. companies began to produce and market an instrument with a raised nut to hold the strings higher above the fingerboard and a steel bar for slide playing, thereby giving rise to the label "steel guitar." The steel guitar suffered from the same problem of insufficient volume that affected the standard guitar in a band context; and like the standard guitar, only electrical amplification could enable the steel guitar to compete with horns.