In the post-Second World War period, the Soviet Union began developing a capable fleet of long-range bombers with the ability to deliver nuclear weapons across North America and Europe. The main threat was principally from high-speed, high-altitude bombing runs launched from the Soviet Union travelling over the Arctic against military bases and built-up industrial centers in Canada and the United States. To counter this threat, Western countries strenuously undertook the development of interceptors that could engage and destroy these bombers before they reached their targets.
Intensive discussions between Avro and the RCAF examined a wide range of alternative sizes and configurations for a supersonic interceptor, culminating in RCAF "Specification AIR 7-3" in April 1953. AIR 7-3 called specifically for crew of two, twin engines, with a range of 300 nautical miles (556 km) for a normal low-speed mission, and 200 nmi (370 km) for a high-speed interception mission. It also specified operation from a 6,000 ft (1,830 m) runway; a Mach 1.5 cruising speed at an altitude of 70,000 ft (21,000 m); and maneuverability for 2 g turns with no loss of speed or altitude at Mach 1.5 and 50,000 ft. The specification required five minutes from starting the aircraft's engines to reaching 50,000 ft altitude and Mach 1.5. It was also to have turn-around time on the ground of less than 10 minutes. An RCAF team led by Ray Foottit visited U.S. aircraft producers and surveyed British and French manufacturers before concluding that no existing or planned aircraft could fulfill these requirements.
After considerable study, the RCAF selected a dramatically more powerful design, and serious development began in March 1955. The aircraft was intended to be built directly from the production line, skipping the traditional hand-built prototype phase. The first Arrow Mk. I, RL-201, was rolled out to the public on 4 October 1957, the same day as the launch of Sputnik I.
Flight testing began with RL-201 on 25 March 1958, and the design quickly demonstrated excellent handling and overall performance, reaching Mach 1.9 in level flight. Maximum speed: Mach 1.98 (1,307 mph, 2,104 km/h) at 50,000 ft (15,000 m) max. recorded speed; Mach 2+ potential. Powered by the Pratt & Whitney J75, another three were completed, RL-202 through -204. The lighter and more powerful Orenda Iroquois engine was soon ready for testing, and the first Mk.II with the Iroquois, RL-206, was ready for taxi testing in preparation for flight and acceptance tests by RCAF pilots by early 1959.
With specifications comparable to then-current offerings from American and Soviet design bureaus, at the time of its cancellation, the Arrow was considered by one aviation industry observer to be one of the most advanced aircraft in the world.
In its planning, design and flight-test programme, this fighter, in almost every way the most advanced of all the fighters of the 1950s, was as impressive, and successful as any aircraft in history.
The Arrow's cancellation eventually led to the end of Avro Aircraft Limited (Canada) and its president and general manager, Crawford Gordon Jr. was fired shortly afterward. In 1962, the Hawker Siddeley Group formally dissolved A. V. Roe Canada and transferred all its assets to Hawker Siddeley's newly formed subsidiary, Hawker Siddeley Canada.
In 1961, the RCAF obtained 66 McDonnell CF-101 Voodoo aircraft, one of the American designs the RCAF originally rejected, to serve in the role originally intended for the Avro Arrow. The controversy surrounding this acquisition, and Canada's acquiring nuclear weapons for the Voodoos and Bomarcs eventually contributed to the collapse of the Diefenbaker government in 1963.
Although nearly everything connected to the CF-105 and Orenda Iroquois programs was destroyed, the cockpit and nose gear of RL-206, the first Mk 2 Arrow, and two outer panels of RL-203's wings were saved and are on display at the Canada Aviation and Space Museum in Ottawa, alongside an Iroquois engine.