The 2.5 liter 250 SL was introduced at the 1967 Geneva Motor Show. Production commenced in December 1966 and ended in January 1968. The short one-year production run makes the 250 SL the rarest of the W 113 series cars. The 250 SL retained the stiffer suspension and sportier feel of the early SLs, but provided significantly improved agility with a new engine and rear disk brakes. Range also improved with increased fuel tank capacity from 65 L (17.2 US gal) to 82 L (21.7 US gal), and resiliency improved with a new cooling water tank ('round top') with increased capacity from 10.8 L (2.9 US gal) to 12.9 L (3.4 US gal). Like its predecessor, the 250 SL was offered with a 4-speed automatic transmission, a 4-speed manual transmission, and the desirable ZF 5-speed manual transmission. For the first time, an optional limited slip differential was available, too. Of the 5,196 250 SLs produced, more than a third were sold in the US.
The main change was the use of the 2496 cc M129.II engine with 6 mm (0.2 in) increased stroke and seven main bearings instead of four. The claimed maximum power remained unchanged at 150 PS (110 kW; 150 hp), but torque improved from 145 lb·ft (197 N·m) to 159 lb·ft (216 N·m). In practice, the 230 SL engines had rarely produced more than 143 PS (105 kW; 141 hp), and the wider power band of the 250 SL resulted in noticeably improved performance.
The 250 SL also marked the introduction of a 2+2 body style, the so-called "California Coupe", which had only the removable hardtop and no soft-top: a small drop-down bench seat replaced the soft-top well between passenger compartment and trunk. Retrofitting the soft-top above the rear seat requires considerable effort and expense. The lack of a soft-top relegated open "California Coupes" to a formidable nice weather ride, so many of them are very well preserved today. While these 2+2 models are rare, their somewhat limited usability makes them not particularly sought after today.
In August 1967, a number of additional changes were incorporated to accommodate stricter safety regulations and US emission laws. The safety improvements included a collapsible steering wheel and padded wheel hub, concave control knobs, elastic black rubber heater levers (instead of colored translucent plastic), and softer, rounded dash top padding. Door handles, locks, and window cranks were modernized and less protruding, the door pockets were elastic, the rear-view mirror frame was chrome instead of black plastic, and the side view mirrors became more angular. Essentially, the 1967 250 SL retained the more classic 'chrome' interior appearance of the 230 SL, whereas the 1968 250 SL featured the modernized 'safety' interior of the 280 SL.
US models acquired mandatory side reflectors on the fenders, three-point safety-belts, an illuminated gearbox for the automatic, and emission control equipment.