The Douglas proposals resulted in the Air Corps placing an order for two prototypes, the XO-35 and XO-36, on 26 March 1930.

The fuselage was a semi-monocoque structure with corrugated duralumin covering, which housed the aircraft's crew of four: a nose gunner/observer, a pilot whose cockpit was situated ahead of the leading edge of the wing, an upper gunner who sat in a cockpit aft of the wing, and a radio operator housed within the fuselage.

[1][2] The projected performance of the new twin-engined Douglas and Fokker observation aircraft was much greater than the Keystone biplanes (the Keystone B-3, B-4, B-5 and B-6) that equipped the Air Corps light bomber squadrons, and both Fokker and Douglas were instructed to complete one of their prototypes as a bomber, with the XO-36 being redesignated the XB-7, with provision to carry up to 1,200 lb (540 kg) of bombs on racks under the fuselage added.

[3] The XO-35 was delivered to the Air Corps at its test center at Wright Field, Ohio on 24 October 1931, with the XB-7 following in July 1932.

[11] Data from McDonnell Douglas aircraft since 1920 : Volume I[12]General characteristics Performance Armament