After several modifications, the first production variants of the PV-12 were completed in 1936. The first operational aircraft to enter service using the Merlin were the Fairey Battle, Hawker Hurricane and Supermarine Spitfire. The Merlin remains most closely associated with the Spitfire and Hurricane, although the majority of the production run was for the four-engined Avro Lancaster heavy bomber. A series of rapidly applied developments, brought about by wartime needs, markedly improved the engine's performance and durability. Starting at 1,000 hp for the first production models, most late war versions produced just under 1,800 hp, and the very latest version as used in the de Havilland Hornet over 2,000 hp. Lancasters flew entire missions with their engines running at full power with no ill effects.
One of the most successful aircraft engines of the World War II era, some 50 marks of Merlin were built by Rolls-Royce in Derby, Crewe and Glasgow, as well as by Ford of Britain at their Trafford Park factory, near Manchester. A de-rated version was also the basis of the successful Rolls-Royce/Rover Meteor tank engine. Post-war, the Merlin was largely superseded by the Rolls-Royce Griffon for military use, with most Merlin variants being designed and built for airliners and military transport aircraft. Production ceased in 1956 with the fulfilment of an order for 170 Merlins for the Spanish Air Force's CASA 2.111 and Hispano Aviación HA-1112 aircraft, after 160,000 engines had been delivered. In addition, the Packard V-1650 was a version of the Merlin built in the United States, itself produced in numbers upwards of 55,000 examples, and was the principal engine used in the North American P-51 Mustang.
In the early 1930s, Rolls-Royce started planning its future aero-engine development programme and realised there was a need for an engine larger than their 21-litre (1,296 cu in) Kestrel which was being used with great success in a number of 1930s aircraft. Consequently, work was started on a new 1,100 hp (820 kW)-class design known as the PV-12, with PV standing for Private Venture, 12-cylinder, as the company received no government funding for work on the project. The PV-12 was first run on 15 October 1933 and first flew in a Hawker Hart biplane (serial number K3036) on 21 February 1935. The engine was originally designed to use the evaporative cooling system then in vogue. This proved unreliable and when ethylene glycol from the U.S. became available, the engine was adapted to use a conventional liquid-cooling system. The Hart was subsequently delivered to Rolls-Royce where, as a Merlin testbed, it completed over 100 hours of flying with the Merlin C and E engines.
In 1935, the Air Ministry issued a specification, F10/35, for new fighter aircraft with a minimum airspeed of 310 mph (500 km/h). Fortunately, two designs had been developed: the Supermarine Spitfire and the Hawker Hurricane; the latter designed in response to another specification, F36/34. Both were designed around the PV-12 instead of the Kestrel, and were the only contemporary British fighters to have been so developed. Production contracts for both aircraft were placed in 1936, and development of the PV-12 was given top priority as well as government funding. Following the company convention of naming its piston aero engines after birds of prey, Rolls-Royce named the engine the Merlin after a small, Northern Hemisphere falcon (Falco columbarius).