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The Iso Isetta originated with the Italian firm of Iso SpA. In the early 1950s the company was building refrigerators, motor scooters and small three-wheeled trucks. Iso's owner, Renzo Rivolta, decided he would like to build a small car for mass distribution. By 1952 the engineers Ermenegildo Preti and Pierluigi Raggi had designed a small car that used the scooter engine and named it Isetta—an Italian diminutive meaning little ISO.

The Isetta caused a sensation when it was introduced to the motoring press in Turin in November 1953, it was unlike anything seen before. Small (only 2.29 m (7.5 ft) long by 1.37 m (4.5 ft) wide) and egg-shaped, with bubble-type windows, the entire front end of the car hinged outwards to allow entry. In the event of a crash, the driver and passenger were to exit through the canvas sunroof. The steering wheel and instrument panel swung out with the single door, as this made access to the single bench seat simpler. The seat provided reasonable comfort for two occupants, and perhaps a small child. Behind the seat was a large parcel shelf with a spare wheel located below. A heater was optional, and ventilation was provided by opening the fabric sunroof.

Power came from a 236 cm3 (14.4 cu in), 7.1 kW (9.5 hp) split single two-stroke motorcycle engine. The engine was started by a combination generator-starter known as Dynastart. A manual gearbox provided four forward speeds and reverse. A chain drive connected the gearbox to a solid rear axle with a pair of closely spaced 25 cm (10 in) rear wheels. The first prototypes had one wheel at the rear; this made the car prone to roll-overs, so they placed two rear wheels 48 cm (19 in) apart from each other. This narrow track eliminated the need for a differential. The front axle was a modified version of a Dubonnet independent front suspension. The Isetta took over 30 seconds to reach 50 km/h (31 mph) from rest. Top speed was only about 75 km/h (47 mph). The fuel tank held only 13 litres (3.4 US gal; 2.9 imp gal). However, the Isetta would get somewhere between 50 mpg-imp (5.6 l/100 km; 42 mpg-US) and 70 mpg-imp (4.0 l/100 km; 58 mpg-US) depending on how it was driven. In 1954, Iso entered several Isettas in the legendary Mille Miglia where they took the top three spots in the economy classification. Over a distance of 1,600 km (1,000 mi) the drivers achieved an average speed of over 70 km/h (43 mph). In view of its maximum speed, which was just 15 km/h (9 mph) higher, this was an almost incredible figure. However, despite its initial success, the Isetta was beginning to slip in popularity at home. This was mainly due to renewed competition from Fiat with its 500C model.

Renzo Rivolta wanted to concentrate on his new Iso Rivolta sports car, and was extremely interested in doing licensing deals. Plants in Spain and Belgium were already assembling Isettas and Autocarros using Italian made Iso components. BMW began talking with Rivolta in mid-1954 and bought not just a licence but the complete Isetta body tooling as well. Rivolta did not stop with licensing the Isetta to BMW. He negotiated similar deals with companies in France and Brazil.

After constructing some 1,000 units, production of the Italian built cars ceased in 1955, although Iso continued to build the Isetta in Spain until 1958.