Written explanations for this very old trick have been traced back to at least 1520 by William Kalush (his research as yet unpublished). Later sixteenth-century sources include Livre nouveau, nommé le difficile des receptes published by Jacques Moderne in 1540; J. Prévost's La premiere partie des subtiles et plaisantes inventions, p. 75 of the King translation, as “To Cut a Thread into Many Pieces, Then Seem to Have Rejoined Them All Together”; and Reginald Scot's Discoverie of Witchcraft, p. 341, as “To burne a thred, and to make it whole againe with the ashes thereof”, both published in 1584.
In 1904, Professor Hoffmann was still describing the traditional method using two lengths of thread: Later Magic, p. 473. In Will Goldston's Magazine of Magic, Vol. 9 No. 2, May 1921, p. 37, we find a transition method. The prepared ball of thread is concealed on a sort of spool (a stick) and attached to the piece that will be broken, but that piece is broken away from the prepared ball and then handed to a spectator to break into pieces. In 1938, J. N. Hilliard or Jean Hugard described the one-piece method in Greater Magic, p. 846, making a comment that, until this description, the method had been taught incorrectly. From this we might surmise that the one-piece method was invented sometime before 1921 to 1938. However, since this trick was recorded at least as far back as 1520, we must be cautious. For one thing, Goldston was notorious for imagining methods for effects he had only seen performed. He might have been inaccurately describing a current method or an improvement on the traditional one. More research is necessary.
It is interesting that twentieth-century Western authors decided that this very old trick likely had an Eastern origin, or perhaps they were just romanticizing the effect. Professor Hoffmann believed the trick came from Japan. The first published instance of title “The Hindu Thread” seems to be in Greater Magic, 1938, p. 847, where Hugard or Hilliard wrote “I do not know whether this trick is really of Hindu origin…” The author of this line is probably Hugard, as he earlier described the Cut and Restored Thread in Close-up Magic for the Night Club Magician, 1934, p. 14, where he added this patter idea: “Let us suppose that you have led the talk to the subject of the Indian Rope Trick. Offer to show the real Hindu method, and bring out the spool.” He goes no further in explaining what connection the fabled East Indian Rope Trick has with the Cut and Restored Thread. The title “The Gypsy Thread” appears to have been coined in 1948 by George Kaplan in his Fine Art of Magic, p. 305.