Critical treatments of Billy Budd and of Melville abound, which is an irony given the origins of the novel. When Melville died in 1891, he left behind the manuscript for Billy Budd, which would not be discovered among his papers for another thirty years. At the time of Melville's death, his reputation as a literary talent had faded, but a few obituary notices did take note of Melville's earlier success and fame. Some of what was written about Melville immediately following his death had a regretful tone, as if his slip into obscurity had constituted a loss for American letters. An obituary in the New York Times, alluding to Melville's past fame, remarked that "this speedy oblivion by which a once famous man so long survived his fame is almost unique, and it is not easily explicable." The obituary went on to wonder at "why [Melville's books] are read and talked about no longer. The total eclipse now of what was then a literary luminary seems like a wanton caprice of fame." However, in North American Review in 1892, W. Clark Russell wrote, somewhat prophetically, that "Famous he was; now he is neglected; yet his name and works will not die. He is a great figure in shadow; but the shadow is not that of oblivion."

Russell's words truly were prophetic, as around the centennial anniversary of Melville's birthday in 1919 a movement known as the "Melville revival" began to develop. In The Gazette of the Grolier Club, William S. Reese, a collector of Melville's works, attributed the emergence of the revival to both Melville's centenary and also to "the beginning of a more disillusioned, deterministic, post-war age," whose readers would be more receptive to Melville's works than his own contemporaries had been. Reese noted that "Melville's centenary in 1919 had brought numerous literary notices, and...In 1921, Raymond Weaver's biography, Herman Melville, Mariner and Mystic, came out, sparking further interest." Billy Budd was published for the first time in 1924 in a volume of Melville's work edited by Weaver, and thus, said Reese, "Melville was made generally accessible to readers."

In his 1921 biography of Melville, Weaver said that Billy Budd and other works in manuscript found after Melville's death were "not distinguished." Weaver added that Billy Budd "would seem to teach that though the wages of sin is death, that sinners and saints alike toil for a common hire." In the biography, Weaver also wrote that in Billy Budd Melville had lost "the brisk lucidity, the sparkle, the verve" of his earlier works and that "Only the disillusion abided with him to the last." Weaver seemed to contradict his 1921 statement in his introduction to 1928 Shorter Novels of Herman Melville, where he said that Billy Budd is "unmatched among Melville's works in lucidity and inward peace."

Weaver referred in his introduction to Shorter Novels of Herman Melville to the "state of the Billy Budd manuscript," proclaiming that "there can never appear a reprint that will be adequate to every ideal." The difficulty of assembling a definitive text plagued Melville critics for decades. Weaver, the first critic to lay eyes on the manuscript, said that it is "in certain parts a miracle of crabbedness: misspellings in the grand manner; scraps of paragraphs cut out and pasted over disembowelled sentences; words ambiguously begun...variant readings, with no choice indicated among them. More disheartening than this even, is one floating chapter...with no numbering beyond the vague direction 'To be inserted.'" F. O. Matthiessen lauded Weaver's accomplishment in a footnote to his 1941 essay, "Billy Budd, Foretopman", because "The problem of editing Melville's one extant major manuscript was an exacting one" and thus critics should be "indebted to [Weaver's] enthusiastic and devoted pioneering for the first full-length study of Melville."

Another critic, Lewis Mumford, also found flaws in Billy Budd; he wrote in 1929 that what is missing in Billy Budd is "an independent and living creation." Mumford felt that while the story takes place on the sea, "the sea itself is missing, and even the principal characters are not primarily men: they are actors and symbols."

During the 1950s and 1960s, the body of Melville scholarship grew rapidly. Particularly after the 1962 publication of what was considered a definitive text of Billy Budd—edited by Harrison Hayford and Merton M. Sealts, Jr.—scholars approached Melville's final novel with renewed interest. Hayford and Sealts wrote in their preface to this definitive edition that in "the first quarter century of criticism (1921-46) [there] seemed to be virtually a consensus, that the work constituted Melville's 'testament of acceptance.'" The editors added that in the 1950s, this earlier consensus had been "flatly contradicted...by those reading the novel as an ironic reiteration of all his lifelong quarrels and denials."

Peter Shaw, looking back in 1993 at the development of Billy Budd scholarship, noticed that "resistance readings eventually began to take on the coloration of 1960s radicalism. Stimulated by the concept of innocent youth punished by paternal authority, critics in the 1960s imagined Melville to be finding fault with 'the system,' by which they sometimes meant the law and sometimes 'the tragic guilt' of society itself...It followed that the story meant not only radically to champion 'the people,' but also amounted to 'a call for rebellion.'" Shaw maintained that the "resistance/ironist reading continued to hold sway in the 1970s." In the 1980s, Shaw said, critics began to "routinely [argue] that Vere's application of the law is arbitrary and unnecessary, that it springs from twisted psychological motives, and that it reflects the inherent cruelty of his privileged class."