It was the world's first true light machine gun produced in quantity and Madsen was able to sell it in 12 calibres to over 34 countries.

In 1883 Captain Vilhelm Herman Oluf Madsen (a Danish artillery officer), and Rustmester Alexander Bjarnov [da] (a weapons technician at the Danish Arsenal), began working on a recoil-operated self-loading rifle; Madsen developed the idea and Rasmussen fabricated the actual weapons.

Investors formed a company (the Dansk Riffel Syndikat; DRS), in 1898 to commercialise the rifle, and bought the patent rights from Madsen and Rasmussen in exchange for royalties on future production.

The machine gun uses a mixed recoil-operated locking system with a hinged bolt that is patterned after the lever-action Peabody Martini breechblock.

After the breech is exposed, an odd lever-type extractor/ejector, mounted under the barrel, pivots to the rear, extracts the empty case, and ejects it through the bottom of the receiver.

[12] The German Army deployed the Madsen in 7.92 mm calibre in 1914, arming infantry companies, mountain troops and later storm troopers.

[15] By 1935, China would acquire roughly 300 Madsen machine guns, with under 100 of these being used for Malmö Flygindustri, SIAI, and Caproni aircraft.

[6] The Argentine Army detachment that protected neutrality along the border with Paraguay and Bolivia during the Chaco War used the Madsen in combat operations at least once in 1933 in the course of an engagement on the southern bank of the Pilcomayo river against members of the Maká tribe commanded by deserters who had looted a farm in Argentine soil, killing some of its inhabitants.

[18] When Brazil acquired some 23 CV-35 tankettes from Italy in the late 1930s, it armed a majority of the vehicles with twin-mounted 7 mm Madsens.

[19] In 1943, the Army planned to produce their own Madsen machine guns at the Laminação Nacional de Metais factory.

It was standard equipment (in 6.5 mm) with the Royal Netherlands East Indies Army (KNIL) during the inter-war period until the surrender to the Japanese in 1942.

Madsens served as temporary armament for Auto-Metralhadora-Daimler 4 × 4 Mod.F/64 armoured cars, which were Daimler Dingos modified with the addition of a turret-like structure.

It was reported that plans were in place to retire the last Madsen guns in service with the Civil Police of Rio de Janeiro State starting in 2008.

[29] During the Russian invasion of Ukraine, in 2022–2023, a member of the Ukrainian youth group "Prava Molod" was spotted with a Madsen.