'institution-skeptical' is a modern compound formed from 'institution' + 'skeptical'. 'institution' originates from Latin 'institutio' (from 'instituere'), where 'in-'/ 'insti-' relates to 'in/within' and 'statuere'/'stituere' carried the sense 'to set up, arrange'. 'skeptical' originates from Greek 'skeptikos' via Latin 'scepticus' and Old French, where 'skeptikos' meant 'inquiring, reflective (one who looks or considers)'.

'institution' passed from Latin 'institutio' into Old French and then into Middle English (e.g. Middle English 'institucioun'), eventually becoming modern English 'institution'. 'skeptikos' moved into Latin as 'scepticus' and through Medieval/Modern French forms into English as 'skeptical' (also spelled 'sceptical' historically). The compound itself is a recent English formation combining the two elements.

Individually, 'institution' originally referred to an act of establishing or an established organization, and 'skeptical' originally meant 'inquiring or reflective' (later 'doubtful'). Over time the compound came to mean 'expressing doubt toward institutions' — i.e., having a generalized distrust or questioning attitude toward formal organizations and authorities.