At a time when the company was financed by the Swiss-based Mimram brothers, Lamborghini began development of what was codenamed Project 132 in June 1985 as a replacement for the Countach model. The brief stated that its top speed had to be at least 315 km/h (196 mph).
The design of the car was contracted to Marcello Gandini, who had designed its two predecessors. When Chrysler bought the company in 1987, providing money to complete its development, its management was unimpressed with Gandini’s designs and commissioned its design team in Detroit to execute a third extensive redesign, smoothing out the trademark sharp edges and corners of Gandini's original design, and leaving him famously unimpressed. In fact, Gandini was so disappointed with the "softened" shape that he would later realize his original design in the Cizeta-Moroder V16T.
The car became known as the Diablo, carrying on Lamborghini's tradition of naming its cars after breeds of fighting bull. The Diablo was named after a ferocious bull raised by the Duke of Veragua in the 19th century, famous for fighting an epic battle with 'El Chicorro' in Madrid on July 11, 1869. In the words of Top Gear presenter Jeremy Clarkson, the Diablo was designed "solely to be the biggest head-turner in the world."
The project is believed to have cost a total of 6,000,000,000 lira.