The 750 kg formula had produced cars of escalating and eventually alarming performance. By 1937, the Mercedes-Benz W125 was producing between 560 and 595 horsepower from a 5,662 cc supercharged inline-eight, and Auto Union's V16 generated 520 bhp from six litres, enabling race speeds above 300 km/h (190 mph) on fast circuits. The frequency and severity of accidents at those speeds prompted the AIACR to introduce more restrictive regulations, with the 3-litre supercharged limit calculated to dramatically reduce available power.
The regulation also retained an allowance for unsupercharged engines of up to 4,500 cc, creating a two-tier technical landscape, though the unsupercharged option was rarely exploited at the front of the field.
The introduction of the new formula rendered both the Mercedes-Benz W125 and the Auto Union Type C ineligible without fundamental redesign. Mercedes-Benz developed the W154 with a new supercharged 3-litre V12 engine, while Auto Union built the Type D, also using a supercharged 3-litre V12 that ultimately developed close to 550 horsepower. The 1938 season saw the sixth AIACR European Championship, won again by Rudolf Caracciola driving for Mercedes-Benz. Caracciola won only one of the four championship rounds that season but finished on the podium in every counting event. Auto Union faced a severe blow early in the year when Bernd Rosemeyer, the 1936 European Champion and one of the few drivers capable of taming the rear-engined Auto Union, was killed in a land speed record attempt on a German autobahn. Tazio Nuvolari joined Auto Union and won the Italian and Donington Grands Prix, providing the team with its most significant results of the season.
The 1939 season continued under the same regulations as war clouds gathered over Europe. Nuvolari won the Yugoslav Grand Prix in Belgrade for Auto Union. Hermann P. Muller won the 1939 French Grand Prix in an Auto Union, while Mercedes-Benz maintained overall competitiveness. The season was cut short as international conditions deteriorated and several events were cancelled or altered. The German teams' dominance continued throughout, with the Italian constructors Alfa Romeo and Maserati unable to close the gap under the new formula.
The 3-litre formula represented an attempt by the sport's governing body to restrain performance through tighter technical limits after the unchecked escalation of the 750 kg era. Despite the reduced displacement limit, the German manufacturers continued to produce highly powerful engines — the Auto Union Type D's V12 approached the power outputs of earlier, larger units thanks to continued development of supercharger technology and fuel chemistry. The formula ended abruptly with the outbreak of World War II in September 1939, after which Grand Prix racing was suspended entirely. When international motor racing resumed after the war, the old prewar cars formed the initial grid until new regulations established the modern Formula 1 World Championship in 1950.