The origins of the car date back to 1925, when Béla Barényi submitted his concepts to the Maschinenbauanstalt Wien. Further influences came from the 1931 Tatra T97, and the 1931 Porsche Typ 12, an experimental prototype that never saw production.

In 1933, Adolf Hitler met with Ferdinand Porsche to discuss the development of a "Volks-Wagen" ("People's Car"), a basic vehicle that should be capable of transporting two adults and three children at a speed of 100 km/h (62 mph), and which should cost no more than 990 Reichsmark (at an average income of 32RM/week).

Hitler's commissioning of the "People's Car" did not necessitate a clean-sheet car design. Ferdinand Porsche had already formulated the original parameters of a car design similar to the final production version of the Beetle several years before it was commissioned, and had already built working prototypes by 1931. Erwin Komenda, Porsche's chief designer, was responsible for the design and styling of the car. However its production only became financially viable when it was backed by the Third Reich. Before the large-scale production of the "People's Car" could commence, war broke out, and available manufacturing capacity was shifted to producing military-use vehicles. Production of civilian VW automobiles did not start until after the post-war occupation began.

The Type 1's mechanics and chassis were shared with several German military vehicles of the period, including the Kübelwagen ("bucket car", later adapted for civil use as the Type 181 or "Thing"), used by both the German military and the SS, and the amphibious Schwimmwagen, built in small numbers.

At the 1994 North American International Auto Show, Volkswagen unveiled the J Mays-penned "Concept 1", a concept car with futuristic styling deliberately reminiscent of the original Beetle's rounded shape. Strong public reaction convinced the company to move the car into production, and in 1998, 20 years after the last original Beetle was sold in the United States, Volkswagen launched the New Beetle, designed by Mays and Freeman Thomas at the company's California design studio.

New Beetles are manufactured at VW's Puebla, Mexico assembly plant.

The New Beetle, with its (water-cooled) engine at the front of the car driving the front wheels, is related to the original only in name, general shape and some styling cues. Under the sheet metal, it is a modern car in every way, based on the Volkswagen A platform.