Phillipps began playing music with the New Zealand punk band the Same in 1978. Following in the footsteps of the Clean and the Enemy, the Same played mostly covers, creating a raw fusion of British Invasion and garage rock. However, the group never recorded. Phillipps applied the same approach for the Chills, the band he formed in 1980 with his sister Rachel and Jane Dodd (bass) after the Same fell apart.

In 1982, the Chills signed with Flying Nun, the influential New Zealand independent record label, and released several singles that were never widely distributed in America and Europe. During this time, the group went through an enormous amount of members: future Great Unwashed bassist Peter Gutteridge, the Clean's David Kilgour, keyboardist Frazer Batts, bassist Terry Moore, guitarist Martin Kean, keyboardist Peter Allison, drummer Martyn Bull, and drummer Alan Haig. While these incarnations of the Chills recorded plenty of singles, they never made an album. Released on the U.K. record label Creation, the group's first album, Kaleidoscope World (1986), was a collection of early singles; it was later released in the U.S. on Homestead.

With the lineup of Phillipps, bassist Justin Harwood, keyboardist Andrew Todd, and drummer Caroline Easther -- the group's tenth lineup -- the Chills recorded their first proper album, Brave Worlds, in 1987. Produced by Mayo Thompson, the leading figure of the cult band the Red Crayola and a former member of Pere Ubu, the bandmembers weren't satisfied with the final result, claiming it was too loose and under-produced. The Chills, particularly Phillipps, were more satisfied with their second full-length album, 1990's Submarine Bells, their first record released on an American major label. Submarine Bells was recorded with yet another version of the band, with Jimmy Stephenson replacing Easther, who was suffering from tinnitus. The album was well received by critics and college radio, yet it failed to break the band into the mainstream in either America or Britain. Two years later, they released Soft Bomb, which suffered the same fate as Submarine Bells. The following year, Martin Phillipps broke up the Chills again, yet the group reconvened a couple times to record Sunburnt (1996) and Stand By (2004).