It was the world's first aircraft to be propelled solely by a liquid-fueled rocket, making its first powered flight on 20 June 1939 with Erich Warsitz at the controls.

It also incorporated some novel concepts, such as an unconventional reclined seating position for the pilot along with a unique jettisonable nose escape system for emergencies.

[1] During the 1920s, German daredevils and inventors had experimented with the use of solid-fuel rockets to propel various vehicles, such as cars, motorcycles, railway carriages, snow sleds, and, by 1929, aircraft such as Alexander Lippisch's Ente and Fritz von Opel's RAK.1.

In the mid 1930s, the aerospace engineer Wernher von Braun and his rocketry team working at Peenemünde investigated the use of liquid-fuelled rockets for powering aircraft.

[5][6] The experimental flights of the He 112 had been subject to the close attention of the Reichsluftfahrtministerium (RLM) (the German Reich Aviation Ministry), which had become interested in the potential for a rocket-propelled interceptor aircraft.

[8] Unlike the preceding He 112, the design team wanted to produce an aircraft that would be purpose-built to harness this new form of propulsion, and thus achieve superior performance from it; it would be from this effort that the He 176 would emerge.

[10] The aircraft itself was relatively compact and in some respects fairly simplistic, being composed almost entirely out of wood, but did possess an advanced and entirely enclosed cockpit with a frameless single-piece clear nose.

[12] The design team recognised that the conventional means of escaping the aircraft in an emergency situation by bailing out would be extremely difficult at high speed and possibly impossible without fatal injuries being sustained by the pilot.

I banked sharp left again to straighten up for the airstrip, losing such speed and altitude as I could, and during this steep turn the rocket died as the tanks dried up.

[10] Following an initial round of flight testing, Heinkel demonstrated the He 176 to the RLM, however, the organisation displayed a lack of official interest in the aircraft.

According to Warsitz, speaking of Von Braun's cooperation during the tests at Pennemunde: "Although not technically part of the He 176-V1 project with the Walter rocket engine, naturally everything affecting it was of interest to himself and his colleagues because the He 176-V2 was to have the von Braun engine..."[14] The RLM's unfavourable attitude towards the aircraft was a major contributor to Heinkel's decision to reduce his involvement in rocket propulsion efforts.

After its retirement, the sole He 176 prototype was put on static display at the Berlin Air Museum, it was destroyed by an Allied bombing raid during 1943.

[13] Prior to the cancellation of the programme, Heinkel had been in the process of designing a more sophisticated rocket powered aircraft, sometimes referred to the He 176 V2, which was allegedly intended for operational use.

[citation needed] Some of the technical knowledge gained through the He 176 was incorporated into future projects undertaken by Heinkel, such as the He 280 prototype jet fighter.

[17] Germany did eventually fly an operational rocket-propelled fighter, the Alexander Lippisch-designed Me 163 Komet, but this was produced by the competing Messerschmitt firm.