It was in essence a scaled-down version of the Ilyushin Il-10, but was fitted with a newly developed Mikulin AM-43 engine with the expectation that it would be faster and more maneuverable than its predecessor.

The relatively high performance of the Il-10 prompted the development by the Ilyushin design bureau in 1944 of a lighter attack aircraft with greater speed and maneuverability using a more-powerful engine.

The Il-16, as the new design was called, was powered by the new liquid-cooled Mikulin AM-43NV engine that delivered 2,300 horsepower (1,700 kW) for takeoff.

The prototype was first flown in 1945 and the engine's torque, coupled with the short rear fuselage, resulted in poor longitudinal stability characteristics.

To correct the problem the second prototype had the rear fuselage lengthened 500 mm (20 in), the area of the vertical tail was increased and the rudder was given a trim tab.