What is the etymology of the term "private eye"?

The term private eye has widespread use to mean private detective or investigator. See, e.g., Oxford Dcitionary Online

Several websites, such as this one, suggest that the term was based on a logo adopted by the Pinkerton agency which featured an eye and the words We Never Sleep. However, none of those surces seem authoritative or provide any reference to a contemporaneous usage of the term.

Pinkerton registered the trademark We Never Sleep with an eye logo in 1950, claiming that it first used the trademark in 1884. [Search "we never sleep" at the USPTO trademark site.]

On its website, Pinkerton claims to be the worlds first private eye but does not claim to have originated, or explain the derivation of the term.

Numerous websites (again lacking authority) and at least one dictionary cite the derivation as

1935–40; eye, allusive phonetic rendering of [the letter] I, abbr. of investigator

Freedictionary.com [citing Random House Kernerman Webster's College Dictionary]

Etymonline lists the first use in 1938, but gives no explanation or source.

However, the term appears earlier in numerous books, including the 1930 Nancy Drew 04: The Mystery at Lilac Inn by Carolyn Keen

Try to figure this one out, Miss Private Eye! [Note: it is unclear as to whether this date is for the character or the actual text]

The term private eye is used to convey spying by Balzac, in the 1928 Cousin Bette

Lisbeth, whom the baron endeavored to ally with Madame Marneffe, so as to keep a private eye upon the household ...

Similarly, it is used in The Judgment of the Sword: The Tale of the Kabul Tragedy, and of the Part Played Therein by Major Eldred Pottinger, the Hero of Herat in 1929

His fellow-commandant, Akbar's Master of Horse, had probably been sent to keep a private eye on the turncoat lest there were any attempt at rescue.

There are numerous earlier uses of the term for your private eye to mean for your confidential viewing.

From whence comes the term private eye to mean private decetive?

Solution 1:

According to the following source, the origin appears to be a pun of PI ( Private Investigator) and was first used with specific reference to private investigation in a 1938 Detective Stories Magazine.

• A One story you mention links it with the Pinkerton detective agency, the first anywhere, which was founded by Allan Pinkerton in Chicago in the 1850s. His firm’s motto was “We Never Sleep” and his business insignia was an unblinking eye. Pinkerton was an early expert proponent of what we now call public relations — among other tricks publishing dime novels based on his experiences — and used to tell the story that criminals so feared him they called him “The Eye”. It’s easy to see how that might have become associated with all private detectives.

• It may well have contributed but the connection is indirect, since private eye came into use several decades after the Pinkerton Agency was in its heyday. The evidence is that the eye part of private eye is a pun derived from private investigator, via the abbreviations PI and private I. It first appears in a story by Raymond Chandler in Dime Detective magazine in June 1938: “We don’t use any private eyes in here. So sorry.”

• Private investigator began as a general term for a specialist who was in private practice, as opposed to working for an employer. In the 1880s it was used — as examples — for a veterinary surgeon who had been brought in by a state government to look into an outbreak of cattle disease and for a research botanist working outside the academic system.

From: www.worldwidewords.org

Others sources confirm the same origin:

Origin (from Yourdictionary.com)

• From private investigator and its abbreviation P.I., through the homophonic term eye in place of "I", and the used of eye as a reference to survellience.

Origin- as mentioned in your question-(from Dictionary.reference.com):

• 1935-1940; eye, allusive phonetic rendering of I, abbreviation of investigator.