They were listed initially as a terrorist organization back in the 1990s, essentially as a sop to the Iranian government in the belief that it would help the U.S. government curry favour with the Iranians. They had taken violent action against the Shah's government back in the seventies. The Clinton administration first put them on the list really as a bargaining ploy to engage the Iranian government.
The administration in which I served kept them on the list--and this is according to Frances Townsend, who was the President's national security advisor--out of fear that if they were taken off, the Iranians would start sending IEDs into Iraq to kill U.S. troops. Of course, they started doing that anyway, so that strategy didn't work. But that really is the story of their being on the list initially and staying on the list.