Gravitational collapse occurs when an object's internal pressure is insufficient to resist the object's own gravity. For stars this usually occurs either because a star has too little "fuel" left to maintain its temperature through stellar nucleosynthesis, or because a star that would have been stable receives extra matter in a way that does not raise its core temperature. In either case the star's temperature is no longer high enough to prevent it from collapsing under its own weight. The collapse may be stopped by the degeneracy pressure of the star's constituents, allowing the condensation of matter into an exotic denser state. The result is one of the various types of compact star. Which type forms depends on the mass of the remnant of the original star left after the outer layers have been blown away. Such explosions and pulsations lead to planetary nebula. This mass can be substantially less than the original star.

The gravitational collapse of heavy stars is assumed to be responsible for the formation of stellar mass black holes. Star formation in the early universe may have resulted in very massive stars, which upon their collapse would have produced black holes of up to 10³ M_☉. These black holes could be the seeds of the supermassive black holes found in the centers of most galaxies. It has further been suggested that supermassive black holes with typical masses of ~10⁵ M_☉ could have formed from the direct collapse of gas clouds in the young universe. Some candidates for such objects have been found in observations of the young universe.

While most of the energy released during gravitational collapse is emitted very quickly, an outside observer does not actually see the end of this process. Even though the collapse takes a finite amount of time from the reference frame of infalling matter, a distant observer would see the infalling material slow and halt just above the event horizon, due to gravitational time dilation. Light from the collapsing material takes longer and longer to reach the observer, with the light emitted just before the event horizon forms delayed an infinite amount of time. Thus the external observer never sees the formation of the event horizon; instead, the collapsing material seems to become dimmer and increasingly red-shifted, eventually fading away.

Gravitational collapse requires great density. In the current epoch of the universe these high densities are only found in stars, but in the early universe shortly after the Big Bang densities were much greater, possibly allowing for the creation of black holes. High density alone is not enough to allow black hole formation since a uniform mass distribution will not allow the mass to bunch up. In order for primordial black holes to have formed in such a dense medium, there must have been initial density perturbations that could then grow under their own gravity. Different models for the early universe vary widely in their predictions of the scale of these fluctuations. Various models predict the creation of primordial black holes ranging in size from a Planck mass to hundreds of thousands of solar masses.

Despite the early universe being extremely dense—far denser than is usually required to form a black hole—it did not re-collapse into a black hole during the Big Bang. Models for gravitational collapse of objects of relatively constant size, such as stars, do not necessarily apply in the same way to rapidly expanding space such as the Big Bang.

Gravitational collapse is not the only process that could create black holes. In principle, black holes could be formed in high-energy collisions that achieve sufficient density. As of 2002, no such events have been detected, either directly or indirectly as a deficiency of the mass balance in particle accelerator experiments. This suggests that there must be a lower limit for the mass of black holes. Theoretically, this boundary is expected to lie around the Planck mass, where quantum effects are expected to invalidate the predictions of general relativity. This would put the creation of black holes firmly out of reach of any high-energy process occurring on or near the Earth. However, certain developments in quantum gravity suggest that the Planck mass could be much lower: some braneworld scenarios for example put the boundary as low as 1 TeV/c². This would make it conceivable for micro black holes to be created in the high-energy collisions that occur when cosmic rays hit the Earth's atmosphere, or possibly in the Large Hadron Collider at CERN. These theories are very speculative, and the creation of black holes in these processes is deemed unlikely by many specialists. Even if micro black holes could be formed, it is expected that they would evaporate in about 10−25 seconds, posing no threat to the Earth.

Once a black hole has formed, it can continue to grow by absorbing additional matter. Any black hole will continually absorb gas and interstellar dust from its surroundings. This is the primary process through which supermassive black holes seem to have grown. A similar process has been suggested for the formation of intermediate-mass black holes found in globular clusters. Black holes can also merge with other objects such as stars or even other black holes. This is thought to have been important, especially in the early growth of supermassive black holes, which could have formed from the aggregation of many smaller objects. The process has also been proposed as the origin of some intermediate-mass black holes.

The black hole named Cygnus X-1 formed when a large star caved in. This black hole pulls matter from the blue star beside it.