A private branch exchange (PBX) is a telephone exchange or switching system that serves a private organization and performs concentration of central office lines or trunks and provides intercommunication between a large number of telephone stations in the organization. The central office lines provide connections to the public switched telephone network and the concentration aspect of a PBX permits the shared use of these lines between all stations in the organization. The intercommunication aspect allows two or more stations to establish telephone or conferencing calls between them without using the central office equipment.

Each PBX-connected station, such as a telephone set, a fax machine, or a computer modem, is often referred to anextension and has a designated extension telephone number that may or may not be mapped automatically to the numbering plan of the central office and the telephone number block allocated to the PBX.

Initially, the primary advantage of a PBX was the cost savings for internal phone calls: handling the circuit switching locally reduced charges for telephone service via the central office lines. As PBX systems gained popularity, they were equipped with services that were not available in the public network, such as hunt groups, call forwarding, and extension dialing. In the 1960s a simulated PBX known as Centrex provided similar features from the central telephone exchange.

A PBX is differentiated from a key telephone system (KTS) in that users of a key system manually select their own outgoing lines on special telephone sets that control buttons for this purpose, while PBXs select the outgoing line automatically or, formerly, by an operator. The telephone sets connected to a PBX do not normally have special keys for central office line control, but it is not uncommon for key systems to be connected to a PBX to extend its services.

A PBX, in contrast from the key system, employes an organizational numbering plan for its stations. In addition the dial plan determines which digit sequences must be dialed to obtain access to a central office trunk. Modern number analysis systems permit users to dial internal and external telephone numbers without special codes to distinguish the intended destination.