The Gremlin's development began in 1966 when AMC design chief Dick Teague and stylist Bob Nixon discussed creating a shortened subcompact from an existing AMC platform. Teague reportedly sketched an early concept on an air sickness bag during a Northwest Orient Airlines flight. Nixon, who joined AMC as a 23-year-old, produced the first formal design sketches in 1967. The production car was derived from the AMC Hornet compact: the wheelbase was shortened from 108 to 96 inches (from 2,743 to 2,438 mm) and the overall length reduced accordingly. The pronounced kammback roofline and upswept rear were aerodynamically efficient and allowed a large cargo area when the rear seat was folded.
AMC marketed the car as "America's first subcompact" and positioned it against imported Volkswagen Beetles as "the first American-built import."
The Gremlin was offered with one of the widest engine ranges in the American subcompact segment: a 199 cu in (3.3 L) inline-six at launch, subsequently a 232 cu in (3.8 L) inline-six, a 258 cu in (4.2 L) inline-six, a 304 cu in (5.0 L) V8 (from 1972, discontinued at midyear 1976 after approximately 41,000 total installations), and a 2.0 L Volkswagen/Audi inline-four introduced for 1977.
Motor Trend recorded 0–60 mph in 12.6 seconds with the 232 cu in six; Car and Driver and Mechanix Illustrated each recorded 11.9 seconds. The Randall AMC dealership in Mesa, Arizona, built a factory-endorsed high-performance variant — the Randall 401-XR — powered by a 401 cu in (6.6 L) V8. Twenty examples were built between 1972 and 1974 for $2,995; they ran 13.90-second quarter-mile passes at 103–106 mph. Car Craft magazine tested one with minor modifications and recorded 12.22 seconds at 115.07 mph while the car remained street-legal.
The most organised factory racing programme came in the International Motor Sports Association RS series for compact sedans. The AMC factory-backed effort was "Team Highball," operated from Raleigh, North Carolina, by Amos Johnson and Bunny Johnson, with drivers Amos Johnson, Whit Diggett, and later Dennis Shaw. The 232 cu in six-cylinder Gremlins produced torque characteristics that proved effective on high-speed circuits such as Daytona International Speedway, where they frequently outpaced rivals including the BMW 2002, Alfa Romeo GTV, Datsun 510, Ford Pinto, Mercury Capri, and Opel Manta. Amos Johnson was named IMSA RS co-champion for 1973. Independent driver George Alderman won the 1974 title.
From 1970, AMC engaged Wally Booth to lead its Pro Stock drag racing programme. Booth and other drivers campaigned Gremlins in AMC's corporate hash red, white, and blue race livery, with Dick Arons building the engines. The team was credited with transforming AMC's reputation from a staid economy-car builder to a genuine performance presence. The 1972 Pro Stock rule changes, which opened the category to smaller cars with small-block engines, made AMC's commitment to the Gremlin commercially logical.
After an initial tube-chassis Gremlin was lost in a towing accident, Booth eventually switched to a Hornet body after discovering the Gremlin's aerodynamics were limiting top speed during testing at Milan Dragway in Michigan. Three factory Pro Stock Gremlins were campaigned nationally. One, sponsored by radio station WIBG in Philadelphia, was subsequently restored with a 401 cu in V8 and four-speed manual; it continues to run quarter-miles of approximately 8.75 seconds at over 150 mph.
The Gremlin body was widely adopted by NASCAR paved and dirt modified stock car teams across the northeastern United States from the 1970s through the early 1990s. Teams believed the Gremlin's long roofline with its rear kick-up provided aerodynamic advantages over the more commonly used Ford Pinto and Chevrolet Vega body styles in the modified class.
The Gremlin's nine-year production run outlasted both the Ford Pinto and the Chevrolet Vega — the Pinto was withdrawn amid stories of fuel-tank fire risk, the Vega plagued by rust and engine durability problems. The AMC Spirit that replaced the Gremlin for 1979 was described by one contemporary writer as "a Gremlin with conventional styling." By total production volume, racing pedigree across three distinct disciplines, and longevity relative to its direct domestic rivals, the Gremlin stands as the most durable product of the first American subcompact generation.
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