The engine was designed in the 1980s to power proposed propfan aircraft such as the Boeing 7J7 and the MD-91 and MD-92 derivatives of the McDonnell Douglas MD-80.

The engine would come in two sizes: a 10,000 shaft horsepower (7,500 kilowatts) variant with a 23:1 compression ratio and a three-stage boost compressor and power turbine added to the T701 core, and a 16,000 shaft hp (12,000 kW) variant with a 33:1 pressure ratio and a four-stage boost and power section.

[8] On February 23, 1987 in Detroit, Michigan, Pratt & Whitney and Allison officially formed a joint company named PW–Allison Engines.

[11] The decision became moot in December 1987, when Boeing indefinitely suspended development of the 7J7 aircraft, four months after delaying the 7J7 availability date from 1992 to 1993.

[21] The flight test program was in preparation for McDonnell Douglas's ultra-high bypass (UHB) MD-91X derivative, a 114-seat airliner[12] that had a planned service entry in the early 1990s.

During the middle of each engine's test program, McDonnell Douglas would let airline representatives fly in the testbed aircraft to assess the passenger experience.

[28] Amidst the flight test delays, McDonnell Douglas repeatedly expressed dismay that PW–Allison had not made a formal offer to place its engines into an MD-90 production program.

[29][30] The airframer wanted to offer its proposed derivatives to airlines with a choice of powerplant options, instead of advertising aircraft availability with just the competing GE36 UDF engine.

The testbed then performed ground runs and taxi tests at Edwards Air Force Base,[34] with the first flight scheduled for January 1989.

[35] More delays occurred, though, including one during preparation for a planned March 12, 1989 first flight that was caused by an abrasion on the gearbox's bearing separator.

[37] At the time, the 578-DX demonstration program was planning to conduct 50 hours of flight tests over the upcoming three to four months.

[40] In September 1989, with the order drought continuing, McDonnell Douglas decided to offer the MD-90 series exclusively with the V2500 turbofan engine, ending the airliner sales prospects for the PW–Allison 578-DX propfan.

As of early 1988, the Allison 578-D engine was the base powerplant for the Future International Military/Civil Airlifter (FIMA) consortium,[43] which intended to build a replacement military transport aircraft for the Lockheed C-130 Hercules and the French-German Transall C-160 for American and western European military airfleets.

[58] Unlike the GE36, the 578-DX was fairly conventional, having a reduction gearbox between the low-pressure turbine and the propfan blades, which was thought to give a fuel efficiency advantage of seven percent against the GE36, according to McDonnell Douglas.

[59] Allison, which developed the gearbox,[34] claimed a fuel savings of ten percent and the elimination of 1,000 turbine blades.

[63] The design was also aided by a study funded by NASA and Allison to develop a 13,000 shaft hp (9,700 kW) contra-rotating gearbox.