Baking powder is a leavening agent, which is a substance that helps baked goods rise. It is based on baking soda, also known as sodium bicarbonate, which has the ability to neutralize acids. When baking soda is mixed with an acidic ingredient, such as buttermilk, chocolate, or molasses, it neutralizes the acid and releases carbon dioxide bubbles. These bubbles, in turn, cause the dough to swell.

Baking powder also contains an acid salt, such as cream of tartar, sodium aluminum sulfate, or calcium acid phosphate, with which it reacts when added to a liquid. This allows baking powder to work in recipes that do not include other acidic ingredients. Modern double-acting baking powder contains two types of acid, one activated by liquid and the other by heat. The extra, tiny air holes thus created during baking give baked goods a lighter texture. In addition, baking powder may contain starch, which serves as a filler and drying agent.

In the 1790s, people in the United States first began using a crude baking powder based on potassium carbonate, which came from perlash obtained from wood ashes. This powder was packaged and sold as American Saleratus, the latter word meaning "aerated salt," because the powder seemed to add air and lift to bread dough.

In the 1830s, a New York doctor named Austin Church began looking for a way to produce a cheaper, cleaner salteratus. Church heated soda ash, also known as sodium carbonate, over a wood-burning fire and found that in time it changed into sodium bicarbonate. In 1846, Church and his brother-in-law, John Dwight, began large-scale distribution of baking soda. Eventually the two men split to form competing companies, and Church introduced the Arm & Hammer brand name. In 1896, descendants of the two men rejoined the companies under the name Church & Dwight. This company still controls about 90 percent of the U.S. consumer market for baking soda.

Around 1835, the first modern-style baking powder was developed. It was a mixture of baking soda and cream of tartar, an acidic substance obtained from the residue in wine barrels. A commercial version of this mixture was introduced in 1850. By the end of the nineteenth century, other acid salts began to replace cream of tartar. Today baking powder for home use typically consists of baking soda, sodium aluminum sulfate, calcium acid phosphate, and cornstarch.