The Ar 240 came about as the response to a 1938 request for a much more capable second-generation heavy fighter to replace the Messerschmitt Bf 110, which was becoming outdated.

Another was ongoing work in the design and construction of pressurized cockpits, which dramatically lowered pilot fatigue for any flight above about 4,500 m (14,760 ft).

The system used a gunsight located in the rear cockpit, operated by the navigator/gunner, which had optics on both the top and bottom of the aircraft, allowing aim in any direction.

[3] As with the Jumo inline-powered versions of the Ju 88, this made the plane look as if it were mounting a radial engine, and the Ar 240, like later Jumo inline-powered fighter aircraft from the Focke-Wulf firm (the Fw 190D, Ta 152 and twin-engined Ta 154) also benefitted from the simpler setup of an annular radiator just forward of the engine.

This led to a complex system for providing skinning stiff enough to be handled in the field, complicating construction and driving up weight.

The first Ar 240 V1 prototype, DD+QL, took to the air on 25 June 1940, and immediately proved to have poor handling in all axes, also tending to overheat during taxiing.

The handling was thought to be the result of the ailerons being too small, given the thick wing, so the second prototype was modified to have larger ones, as well as additional vertical fin area on the dive brakes to reduce yaw.

Ar 240 V3 followed, the first to be equipped with the FA 9 rear-firing armament system, developed jointly by Arado and DVL, armed with a 7.92 mm (.312 in) MG 81Z machine gun.

[4] The Ar 240's excellent performance quickly led to the V3, V5 and V6 being stripped of their armament, including the defensive guns, and used as reconnaissance aircraft over England, where no other two-seater could venture by 1942.