In 1998, the Illinois Community College Presidents Council (Presidents Council) identified the need for a coordinated system-wide approach to community college online degree and certificate delivery. This led to the development of a fellowship at the Illinois Community College Board (ICCB) to lead the development of a virtual community college for Illinois. Diane Davis of Oakton College was named Fellow in April of 1999. A Steering Committee was formed to guide the development of what would become ILCCO. On June 15, 2000, the Presidents Council voted to accept the proposal for the creation of ILCCO. At the September, 2000, meeting of the Illinois Community College Board, the board voted to approve the formation of ILCCO.

ILCCO established a cooperative agreement between the 48 community colleges in Illinois. The agreement allowed the colleges to share online courses and programs with each other, expanding their offerings to serve their students. Students were able to select from a broader palate of courses and programs while still working through their home college. Colleges and faculty were assisted in identifying and developing high demand courses, to be offered statewide. ILCCO operations were guided by the principle of keeping the process simple for students. Students would have access to courses available throughout the state, but work through their local college for student services (enrollment, payment, transcript, etc.).

ILCCO received grant funding to support its development. In 2001, ILCCO received a $2.3M Learning Anytime Anywhere Partnerships (LAAP) grant. It was also awarded an $85,000 Illinois Century Network (ICN) Content Development grant. In 2002, ILCCO received a $1.1M Fund for the Improvement of Postsecondary Education (FIPSE) grant. The state of Illinois also provided grant funding directly to colleges through an ILCCO Student Support Center grant. In 2002, college districts were awarded $13,808, and in 2003, college districts were awarded $12,025, to provide support staff and marketing efforts.

Funding provided development of ILCCO in 3 key areas: curriculum development, faculty development, and technology. ILCCO provided funding for the development of 281 shared online courses at 36 colleges. ILCCO developed the ILCCO Learning Academy for Teaching Online to provide faculty development. The Learning Academy operated from 2001 - 2004 and provided 126 workshops with 1,432 participants. ILCCO provided funding for the development of online software to support ILCCO:

• The Internet Course Exchange (ICE) was developed to handle the administrative needs of course sharing between colleges.
• The Online Assessment System for Internet Students (OASIS) was developed to prepare students for online courses.
• The Online Learning Evaluation (OLE) was developed for online course evaluations.
• The Database for Innovative Course Exchange (DICE) was developed as a calendaring and registration tool for professional development opportunities.

ILCCO operated in a pilot phase from spring 2001 to summer 2002. The pilot included 16 colleges from the Western Illinois Education Consortium (WIEC), the Illinois Prairie Internet Consortium (IPIC), and 2 others. The initial colleges were:

On September 11, 2001 (yes, that September 11), ILCCO began college training to rollout ILCCO statewide. Trainings occurred throughout the fall and prepared colleges for participation in ILCCO, which opened for statewide operation in the fall 2002 semester.

ILCCO operated as a free service to the 48 Illinois community colleges through FY 2005. In FY 2006, ILCCO moved to a paid membership model to support the cost of ILCCO. With the move to the membership model, ILCCO's emphasis began to focus on 3 areas of service: leadership, professional development, and course and program sharing.