Developed towards the end of the 1960s, the Fiat 127 was launched as a two-door saloon in April 1971. A three-door hatchback, using an identical body profile but with a full-depth rear door and folding rear seat, was launched the following year; this would prove to be the most popular version of the 127. This was Fiat's first supermini-sized hatchback, along with a state-of-the-art transverse-engine/front-wheel-drive layout, with the transmission mounted on the end of the engine, both design ideas had been fully trialled since 1964, by Fiat's Autobianchi subsidiary with the Autobianchi Primula and 1969 Autobianchi A112 and A111 - although these models were not as widely exported as the 127 was. The larger Fiat 128, launched in 1969, was the first Fiat badged car to use the same transverse powertrain layout. The 127 used, as the A112, a shrunken version of the 128 platform and the rugged Fiat OHV 100 series 903 cc engine, that had powered the Autobianchi and, with various cylinder capacities, earlier generations of Fiat cars. The 127 also featured a unique transverse leaf spring suspension at the rear. Safety was another area of innovation - the 127 included an articulated steering column and crumple zones for progressive deformation under impact.
It was also the first car fitted with an all-polypropylene bumper on steel support. The 127 was an instant success, winning the European Car of the Year award for 1972, and quickly became one of the best-selling cars in Europe for several years. It was the third Fiat in six years to receive this accolade.
In June 1974, slightly over three years after the model's introduction, Fiat reported that the one millionth 127 had been completed at the Mirafiori plant in Turin, after just over three years in production. The (in its time) hugely successful Fiat 600 had taken seven years to reach that same milestone.
The Series 2 version of the 127 debuted in May 1977. It featured a restyled front and rear, a new dashboard (although almost identical in layout to that of the Series 1), larger rear side windows (using rear quarter pressings derived from those used on the Brazil market Fiat 147) and the option of the 1049 cc engine - uniquely for the 127 this was the five-bearing OHC "Brazil" 124 series engine from the 147 rather than the Fiat OHC unit from the 128. The tailgate was extended and now reached nearly to the rear bumper, addressing complaints about the high lip over which luggage had to be lifted for loading into the earlier 127 hatchbacks.
The 127 was replaced as Fiat's high volume product in this sector by the Fiat Uno in January 1983, though versions manufactured in South America continued in production till 1995: Fiat imported the South American 127 Unificata to Europe, until 1987, only for left-hand drive markets. The 127 disappeared from the right-hand drive British market soon after the Uno went on sale there in June 1983.