While source criticism became a dominant interpretive method, the influx of nonbiblical data prompted a more nuanced investigation of the prehistory of the written biblical traditions. The pioneer in this work was the German scholar Hermann Gunkel (1862–1932), perhaps the most influential biblical interpreter of the twentieth century. while accepting Wellhausen's analysis as valid, Gunkel incorporated evidence both from Babylonian literature and from comparative folklore to propose a shift in emphasis from history to the history of literature. Prior to the formation of the Pentateuchal “documents” there was discernible a long process of development and transmission of “forms,” or genres, which both had parallels in nonbiblical sources, and, coincidentally, were vehicles for preserving very ancient traditions. These forms have their own history and chronological and cross‐cultural continuity.
Central to form‐critical method was the identification of the Sitz im Leben (“setting in life”), the original and subsequent contexts in which the forms were developed and used. Gunkel himself applied form criticism to the book of Genesis in his commentary first published in 1901, in which he isolated such forms as saga, legend, taunt, curse, hymn, etiology, and proverb. His studies on the Psalms (1928–1933) were also groundbreaking, setting the terms of the discussion for the rest of the century by his classification of the various genres (hymn, individual and communal laments, individual and communal thanksgivings, royal psalms, wisdom psalms, etc.). Although there is a kind of idealism about the definition of the forms, parallels from outside the Bible confirmed their applicability and enhanced the understanding of the particulars of biblical traditions.
Gunkel himself had not hesitated to apply his insights to the New Testament, as in his important monograph on creation and chaos as central themes in prophetic and especially apocalyptic literature, including the book of Revelation. Two of his students, Martin Dibelius and Rudolf Bultmann, applied the principles of form criticism more systematically to the Gospels. They refined the definitions of forms such as parables and miracle stories and, in Bultmann's case especially, identified similar forms in other ancient sources. Although the question of the historical Jesus was still an issue, New Testament form criticism moved beyond what could be hypothesized about the original setting in the life of Jesus himself and focused more on the role that the forms played in various settings in earliest Christianity.