Originally developed as Pontiac's new economy car engine, it was used in a wide variety of vehicles across GM's lineup in the 1980s as well as supplied to American Motors Corporation (AMC).

[1]: 1 The development team's design goals were to minimize noise and vibration while maximizing durability, drivability, fuel economy, and "usable" power at lower engine speeds.

[1]: 2 Focusing on making power at lower engine speeds was a deliberate consideration in order to meet the rest of the design goals.

Careful consideration was made to the design of the intake manifold and exhaust gas recirculation system to ensure power output from each cylinder was equalized.

Power consumption of the water and oil pumps were reduced, and the piston rings, cylinder bores, and crankshaft journals were designed to minimize friction.

Recognizing that cars with four-cylinder engines equipped with air conditioning tended to experience drivability issues in hot weather, other improvements were made including a cut-off switch that shut the compressor off at wide open throttle and a delay incorporated into the air conditioning's circuitry to prevent the compressor from engaging until twelve seconds after the engine was started.

[1]: 7–10 The Iron Duke's first applications were in the 1977 Astre and Sunbird subcompact cars, replacing the 2.3-liter Vega engine, and in the compact Phoenix.

The original reverse-flow cylinder head was replaced by a crossflow design, a new two-barrel carburetor called "Vara-Jet" was introduced, the distributor was relocated, and the size of the oil pan was reduced.

For 1980 the Iron Duke engine was redesigned to be mounted transversely, to suit the new front-drive General Motors "X-body" cars.

During 1983, the all-wheel drive Eagle base engine switched from the Iron Duke to a new, AMC-developed 150 cu in (2.5 L) four-cylinder.

Several significant changes were made in 1987, which included: an improved cylinder head, intake manifold, and throttle-body fuel injection module; a more-modern serpentine belt with an automatic spring-loaded tensioner for the accessories; and a Distributorless Ignition System (DIS).

The Grumman LLV (Long Life Vehicle) built from 1987 until 1994 for the United States Postal Service for use in mail delivery were initially powered by the Iron Duke engine.