In 1939, the U.S. Army possessed few tanks or viable tank designs. The interwar years had been a time of small budgets for tank development. The United States had no infrastructure for tank production, little experience in tank design, and little doctrine to guide design efforts.

In this context the M2 series medium tank was developed. Though typical of tanks of many nations when first produced in 1939, by the time the U.S. entered the war the M2 design was obsolete with only a 37 mm gun, about 30 mm armor, and a very high silhouette. The success of tanks such as the Panzer III and Panzer IV in the French campaign, prompted the U.S. Army to rethink their designs. The U.S. Army immediately issued a requirement for a new medium tank armed with a 75 mm gun in a turret. This eventually became the M4 Sherman. However, until the Sherman could be ready for production, an interim design with a 75 mm gun was urgently needed.

The M3 was the interim solution. The tank design was unusual in that the main weapon, a larger caliber, lower-velocity 75 mm gun was in an offset sponson mounting in the hull, with consequent limited traverse. A small turret with a lighter, higher-velocity 37 mm gun was on the top of the tall hull. A small cupola on top of the turret held a machine gun giving the effect of one turret on top of another. The use of two main guns was seen on tanks like the French Char B, the Soviet T-35, and the Mark I version of the British Churchill tank. In each case, two weapons were mounted to give the tanks adequate capability in firing both anti-personnel high explosive ammunition (which needed to contain large amount of explosives) and armor-piercing ammunition for anti-tank combat (with efficiency depending on a kinetic energy of the projectile). The M3 differed slightly from this pattern by using a main gun which could fire an armor-piercing projectile at a velocity high enough for efficiently piercing armor, as well as deliver a high-explosive shell that was large enough to be effective. By using the hull mount, the M3 design was brought to production quicker than if a proper turreted mount had been attempted. It was well understood that the M3 design was deeply flawed, but the need for tanks was urgent.

The British ordered the M3 when they were refused permission to have their tank designs made by American factories. They were unhappy with the tall profile and had their own turret fitted—lower in profile with a bustle at the back for the radio set. Tanks modified with the new turret received the name "(General) Grant" while unaltered M3's were called "General Lee", or more usually just Grant and Lee. These names were, however, only used by British and Commonwealth forces; the U.S. Army never referred to the tanks as anything but M3 Mediums. The Grant required one fewer crew member than the Lee due to the movement of the radio to the turret. Nevertheless the M3 was successful as an interim solution and brought much needed firepower to British forces in the African desert.

The chassis and running gear of the M3 design was adapted by the Canadians to develop their Ram tank—a conventionally turreted tank. The hull was also used for self-propelled artillery and recovery vehicles.