Although the introduction of the pengő was part of a post-World War I stabilisation program, the currency survived for only 20 years and experienced the most extreme hyperinflation ever recorded.

The Hungarian participle pengő means 'ringing' (which in turn derives from the verb peng, an onomatopoeic word equivalent to English 'ring') and was used from the 15th to the 17th century to refer to silver coins making a ringing sound when struck on a hard surface, thus indicating their precious metal content.

Proposals included turul (a bird from Hungarian mythology), turán (from the geographical name and ideological term Turan), libertás (the colloquial name of the poltura coins issued by Francis II Rákóczi), and máriás (the colloquial name of coins depicting Mary, patroness of Hungary).

A stabilisation program covered by a League of Nations loan helped bring down inflation, and the korona was replaced on 1 January 1927 by a new currency, the pengő, which was introduced by Act XXXV of 1925.

In the beginning the cover ratio[clarification needed] (which included gold and – up to 50% – foreign exchange) was fixed at 20%, but this had to be raised to 33.3% within five years.

The war caused enormous costs and, later, even higher losses to the relatively small and open Hungarian economy.

The national bank was practically under government control, and the issue of money was proportional to budgetary demands.

The pengő lost value dramatically after World War II, suffering the highest rate of hyperinflation ever recorded in human history.

However, this did not stop the hyperinflation, and prices continued spiraling out of control, with ever-higher denominations introduced.

The hyperinflation was so out of control that at one stage it took about 15 hours for prices to double and about four days for the pengő to lose 90% of its original value.

'tax pengő') on 1 January 1946, originally as an indexed unit of account for budget planning: the idea was that by setting the value of the adópengő in terms of regular pengős every day, the adópengő would try to protect the government budget from the effects of hyperinflation.

According to William Bomberger and Gail Makinen in October 1983, the issuance of the tax bills escalated the hyperinflation that eventually affected both regular pengős and adópengős — but the adópengő nevertheless forced the regular pengő into disuse as prices expressed in the latter became unbearable.

New 5 P, 10 P, 20 P, 50 P and 100 P pengő notes were printed and a 1000 P banknote was added to this series — however, the latter had such a high value that it was rarely used except for large cash transactions between businesses and banks.

At the end of the Second World War, the Szálasi government and the occupying Soviet army issued provisional notes in the territories under their power, exacerbating inflation.

During the period of hyperinflation, note designs were reused, changing the colour and replacing the word pengő with first milpengő, then b.-pengő, to generate higher denominations.

These simple design notes on low-quality paper became legal currency in the last months of the hyperinflation, almost completely replacing the pengő.