The term Rear Admiral originated from the days of Naval Sailing Squadrons, and is most directly associated with the British Royal Navy. Each Naval Squadron would be assigned an Admiral as its head, who would command from the center vessel and direct the activities of the squadron. The Admiral would in turn be assisted by a Vice, or Vice Admiral, who commanded the lead ships which would bear the brunt of a naval assault.

In the rear of the Naval Squadron, a third Admiral would command the remaining ships and, as this section of the squadron was considered the least dangerous, the Admiral in command of the rear would typically be the most junior of the squadron Admirals. This has survivied into the modern age, with the rank of Rear Admiral the first and junior-most of the Admiralty ranks.

In the United States Navy, the rank of Rear Admiral is divided into two grades, being that of the Upper and Lower Half. This practice began in the late 19th century, when Rear Admirals would be assigned a senority on the Admiralty promotion list. Those on the upper half of the list would receive a higher rate of pay, even though all Rear Admirals were considered the same rank.

When the United States Navy abolished the rank of Commodore, Rear Admirals on the lower half of the promotion list assumed duties of one star admirals, although until the 1980s all Rear Admirals still wore two stars as their badge of rank. Since then, Rear Admirals Lower Half wear one star while Rear Admirals Upper Half wear two. Verbal address remains "Rear Admiral" while on correspondence an (LH) and (UH) typically follow the Rear Admiral's rank title to distinguish between one and two stars.