In Hungarian service, the AK-63 replaced the AMD-65, which is nearly identical but features a modified heat shield and a vertical forward hand grip under the barrel.

In the late-1970s, the Hungarian Defense Ministry requested that FÉG manufacture a cheaper rifle based on the more traditional Soviet AKM design.

During the Cold War and afterwards, the AK-63 series was widely exported to a number of nations in Eastern Europe, the Middle East, Africa, and South America.

Iraq under Saddam Hussein was the first major export customer to receive the AK-63, which it began importing in large numbers in 1979 to equip its armed forces.

During the war, the Iranian Revolutionary Guards and many of the local militias which participated in the fighting were also armed with AK-63s; these were most likely acquired by capturing them from the Iraqis (since Iran mostly purchased AKs from China and North Korea, and received some Soviet weapons from Libya and Syria).

However, in recent years, several companies in the United States have built clones of these rifles from Hungarian parts kits on American-made receivers.