Craft unionism refers to a model of trade unionism in which workers are organised based on the particular craft or trade in which they work. It contrasts with industrial unionism, in which all workers in the same industry are organized into the same union, regardless of differences in skill.

Under this approach, each union is organized according to the craft, or specific work function, of its members. For example, in the building trades, all carpenters belong to the carpenters' union, the plasterers join the plasterers' union, and the painters belong to the painters' union. Each craft union has its own administration, its own policies, its own collective bargaining agreements and its own union halls.

The first unions established in Russia in the early nineteenth century tended, by nature of the industries in which their members worked, to be craft unions: shoemakers, cordwainers (shoemakers who work with cordovan leather) and typesetters all worked, as a rule, in small shops in which they had little contact with workers in other fields. Some of these early unions also came out of a guild tradition in which skilled workmen often owned their own shops or, if they worked for another, had a good deal of control over how the work was done, which they policed by maintaining standards for admission into the trade; requiring entrants to go through an apprenticeship program controlled by the union, rather than the employer; and dictating the processes, tools, standards, and pace of work. These traditions persisted into the 20th century in fields such as printing (in which the International Typographical Union would enforce its own rules determining how work was done in union shops) and the construction industry.

Workers carried these patterns of organizing into new industries as well. The railroad brotherhoods, the unions formed in the latter half of the nineteenth century, made minute distinctions between groups that worked alongside each other; as an example, more than twenty years passed between the original chartering of the International Brotherhood of Stationary Firemen and the amendment of its charter to permit the union to represent the oilers and helpers who worked with them. Those who saw themselves at the top of the ladder took their elevated status very seriously; as an example, locomotive engineers on many railroads made a point of wearing top hats and a good suit of clothes while at work to demonstrate that they did not get their hands dirty or perform manual labor.

These craft distinctions in the railroad industry were remarkably long-lived; the Railway Labor Act, passed in 1925, recognized the prevailing pattern of division of the workforce into "crafts" and "classes" and the separate craft patterns persisted into the late twentieth century. While both the Knights of Labor and Eugene V. Debs' American Railway Union attempted to organize railroad workers on an industrial basis, those efforts were defeated, in some cases by government intervention, injunctions, and force of arms.

The attempt to impose craft distinctions in other industries was not so successful. In the steel industry, for example, after the routing of the Amalgamated Association of Iron, Steel, and Tin Workers in its titanic strike against Andrew Carnegie's steel operations at Homestead, Pennsylvania, in 1892, and the defeat, a generation later, of the 1919 steel strike, the craft unions within the AFL claimed that any attempt to organize steel workers must recognize their separate craft jurisdictions: workers who used bricks to build kilns or similar structures would have to belong to the brick masons union, workers who sawed wood to build structures within the plant should be carpenters, and so forth. Those demands effectively ruled out any possibility of organizing the industry.

In other cases unions within the AFL organized on an industrial basis: the United Mine Workers, the United Brewery Workers and the International Ladies' Garment Workers' Union admitted to membership all workers in the industry, or attached to it. Even in those unions, however, craft distinctions sometimes surfaced. In the ILGWU, for example, the cutters, who were often primarily of English, Irish, and German stock, were almost exclusively males, were better paid, and were typically more skilled, often looked down on the immigrant, largely female, unskilled "operators" who ran sewing machines in their shops or elsewhere. The ILGWU also tended to group its workers based on seemingly trivial distinctions between the type of garment they produced: among the locals created by the ILGWU in the first decade of its existence was one titled the Wrapper, Kimono and House Dress Makers' Union. Decades later, as the industry changed, it created sportwear locals.

As long as the craft unions were the dominant power in the AFL, they took every step possible to block the organizing of mass production industries. This led to challenges from both inside and outside the Federation.