The Volvo 850 was shown for the first time in June 1991, and the car marked a departure for Volvo, featuring multiple unprecedented features for the company; these included a transverse 5-cylinder engine driving the front wheels,[12] a Delta-link rear axle, a side impact protection system, and a self-adjusting front seat belt mechanism.

When development had finished, Volvo had spent the highest sum in the history of the country on an industrial project in Sweden.

It was launched with the slogan "A dynamic car with four unique innovations"[17] which referred to the newly developed five cylinder transverse engine, the Delta-link rear axle,[18] the Side Impact Protection System (SIPS),[19] and the self-adjusting seatbelt reel for the front seats.

[18] Full power equipment was standard on all 1993 850 models, with a sunroof and built-in child booster seat in the back folding arm rest.

[18] In terms of technical features, Volvo switched from 4-bolt to 5-bolt hubs, made ABS standard on all markets and introduced a new A/C system.

Other options during the model run included features such as traction control, leather interior, power glass sunroof, power seats, heated seats, remote keyless entry, automatic climate control, and automatic transmission.

"[35] For 1995, the special limited edition 850 T-5R was offered, and was a commercial success, leading Volvo to produce a second run in 1996.

[37] The vehicle was based on the 850 Turbo, utilizing the B5234T5 engine with a special ECU (Bosch #628 in U.S and #629 in EU) that added an additional 2 psi (0.1 bar) of turbocharger boost pressure,[38] giving the engine an extra 18 hp (13 kW; 18 PS) for a total of 243 hp (181 kW)[39] and 250 lb⋅ft (340 N⋅m) of torque.

The T-5R was renowned as a sleeper car; despite its boxy, understated appearance, it boasted a drag coefficient of 0.29 and was capable of accelerating from 0 to 60 mph (97 km/h) in 5.8 – 6.0 seconds (depending on transmission and body type).

The vehicle came standard with Pirelli P-Zero tyres, providing lateral grip of 0.88 g. The engine tuning was co-developed with Porsche, as was the transmission and other powertrain components.

On the North American market only two options could be chosen, a trunk-mounted Alpine 6-CD changer and no-cost 16" wheels for a smoother, more comfortable ride and driveability in snow when using all-season tires.

Also included in the 1995 T-5R package was a front bumper with a lip, rear spoiler, side skirts, polished aluminum door sills, special graphite leather and Alcantara seats, and a black interior with deep walnut wood grain accents.

6964 T-5Rs were produced worldwide, of which the largest market was Germany (1,433), Italy (914; 2.0 turbo), United States (876), Japan (749), Netherlands (489), UK (440), Sweden (321), Spain (185), and Canada (103).

[36] The interior upgrades included bucket style heavily bolstered 'sport' front seats (Alcantara centre with leather bolsters), Alcantara door cards, 2-tone leather steering wheel, stainless steel '850' kick plates and R branded over mats.

Due to encumbrances placed on engine volume by the Italian government, 850 Rs sold in Italy were based on the 2.0-litre 850 Turbo, producing 211 PS (155 kW).

The 850 Estates were driven by Rickard Rydell and Jan Lammers and Volvo finished eighth in the Manufacturers' standings of the 1994 championship.

With Rickard Rydell and Tim Harvey driving, the 850 Saloons qualified on pole position 12 times and won six races, with Volvo placing third in the Manufacturers Championship.

In 1996, an improved 850 Saloon competed in the championship with Rickard Rydell and Kelvin Burt driving, achieving five race wins.

It entered the Australian Super Touring Championship with an estate version driven by Scott in 1995 and an 850 saloon by Brock in 1996 and Jim Richards in 1997.