As a youth Crompton spun cotton on a spinning jenny for his family; its defects inspired him to try to invent a better device. In 1779, after devoting all his spare time and money to the effort, he produced a machine that simultaneously drew out and gave the final twisting to the cotton fibres fed into it, reproducing mechanically the actions of hand spinning. Probably the machine was called a mule because it was a cross between the machines invented by Sir Richard Arkwright and James Hargreaves.

Demand for Crompton's yarn was heavy, but he could not afford a patent. He therefore revealed the machine's secret to a number of manufacturers on the promise that they would pay him. All he received was £60. Years later (in 1812), when there were at least 360 mills using 4,600,000 mule spindles, Parliament granted him £5,000. He used it to enter business, unsuccessfully, first as a bleacher and then as a cotton merchant and spinner.