It was initially offered with a 1.8 liter version of the 1.7 liter inline-four cylinder M136 engine used in the slightly smaller production type 170 V. It was the first Mercedes-Benz to carry in its name the suffix “S” (for Sonder modell (Special model) denoting a superior level of comfort and quality.

However, in several respects it was more directly a development from the six-cylinder Mercedes-Benz 230 which the company had produced, albeit in small numbers, between 1938 and 1943.

With the arrival of the all-new 1.8 liter Mercedes-Benz W120 180 "Ponton" in 1953 the 170 S was discontinued and a 170 S-V employing the 170 S' larger engine but the 170 V's slightly smaller body was introduced.

It shared the four speed all-synchromesh transmission of the 170 V.[4] The front wheels were attached using coil springs and double wishbones with a stabilizer bar, as opposed to the simple lateral leaf-spring arrangement on the 170 V. Since the war the only version of the Mercedes-Benz 170 V available to the public had come with a four-door sedan/saloon body.

Although the 170 S was promoted as a car for company directors, the soubriquet of "first S-Class Mercedes-Benz" which began to be applied to it more than twenty years later, following the launch of the manufacturer's W116 is not one that would have been used or recognized in the 1950s.

Under the bonnet/hood the camshaft was now driven via a chain rather than via gear cogs, a hypoid differential was fitted and the rear track was increased by 15 mm (0.59 in).

The relatively lumpy engine note and reduced performance of the diesel car were at variance with the up-market image of the 170 S, but no doubt both cost conscious company directors and upmarket taxi operators appreciated the >25 percent improvement in fuel consumption using a fuel which, on account of the tax rates applied, was already provided at a relatively low price in Germany.