1670s, "state of being impeded, obstructed, or entangled" (of affairs, etc.), from embarrass + -ment, or from French embarrassement, from embarrasser.
As "a mental state of unease," from 1774. Meaning "thing which embarrasses" is from 1729. Earlier words expressing much the same idea include baishment "embarrassment, confusion" (late 14c.); baishednesse (mid-15c.).