In the late 1980's and early 1990's two countries were both moving towards what we call MMA. Brazil, where the Gracie familiy had been working to popularlize jiu jitsu as a real fighting art by taking on challenge matches since the 1930's. They had developed a rivalry over several decades with a rival fighting school called Luta Livre Esportiva which had independently evolved into a style comparable to catch wrestling. After a series of street fights between their champions (most famously Rickson Gracie vs Hugo Duarte) In 1991 the two camps put on the Desafio - Jiu-Jitsu vs. Luta Livre event. Which pitted three BJJ fighters (Wallid Ismail, Murilo Bustamante, and Fabio Gurgel) against three Luta Livre fighters (Eugenio Tadeu, Marcelo Mendes, Denilson Maia). The BJJ fighters swept the event. (The Gurgel/Maia fight is on YouTube in two parts, part one, part two.)

Here's a Brazilian TV report from 1991. It's in portugese but the video is pretty self-explanatory, they go through the event and then show some traditional karate guys point fighting. Gives you a good feel for the media sensationalism and the stark contrast between the proto-mma styles and traditional martial arts.

Meanwhile in Japan, pro-wrestling had been taking a turn towards the real throughout the 1980's. Karl Gotch was a huge influence on this. Under the leadership of pro-wrestlers like Akira Maeda and Masakatsu Funaki Japanese pro-wrestling began to emphasize actual submission holds. In the early 1990's Funaki formed Pancrase to be a real "shoot" organization. It wasn't quite MMA at first -- they only allowed open hand strikes and kicks standing and no strikes on the ground. Here's a representative match from the old Pancrase featuring the organization's founders Masakatsu Funaki and Minoru Suzuki

Then at UFC one, the two worlds collided. With Ken Shamrock and Royce Gracie meeting in a classic match up. Watch how Shamrock's submission attempts ignore position and Royce takes advantage by constantly working for dominant position. The gi choke Royces uses to win would never happen in modern MMA.

Links to more MMA History in the full entry.

Previous installments of MMA History:
XII: End of the UFC Glory Days
XI: Carlson Gracie's Mighty Camp
X: The Reign of the Wrestlers
IX: Strikers Attack
VIII: From Russia With Leglocks
VII: A New Phase in the UFC
VI: A Dutch Detour
V: The Reign of Royce
IV: Rickson Brings Jiu Jitsu Back to Japan
III: More on Japan
II: The Ur-Brazilian MMA Feud: BJJ vs Luta Livre and the Style They Never Saw Coming
I: UFC 1 Pancrase meets BJJ