Development of the C3 R5 began in early 2017. Citroën sought to improve substantially on its prior R5-class cars, the Peugeot 208 T16 and the Citroën DS3 R5, both of which had proven problematic and commercially unpopular with privateer teams. The new car was designed largely from scratch with little carryover from the DS3 platform, aiming for a cleaner, more competitive package.
Citroën Racing Technologies engaged factory drivers Stéphane Lefebvre and Craig Breen as development drivers throughout the summer of 2017, alongside Yoann Bonato, who was contracted specifically for the project. The first complete working prototype was finished in September 2017. A month later, the test car made its public appearance at the Rallye du Var, where Bonato drove select non-competitive stages to gather early feedback in a real-event environment.
The C3 R5 received FIA international homologation on 1 January 2018, clearing it for full competition. Its competitive debut came at the 2018 Tour de Corse in April, where it was entered for French crews Stéphane Lefebvre and Gabin Moreau, and Yoann Bonato and Benjamin Boulloud. Bonato finished second in the WRC-2 class and tenth overall on that debut outing, a strong result that signalled the car's competitive credentials immediately.
In its debut season, the C3 R5 demonstrated consistent front-running pace in the WRC-2 class. Yoann Bonato used the car to claim the 2018 French Rally Championship title, validating it against domestic competition. By 1 May 2019, a total of 26 cars had been built, with 22 already sold to independent customer teams — a sign of strong privateer demand.
Citroën continued to campaign the C3 R5 with a factory-supported entry in the WRC-2 Pro class, with Norwegian driver Mads Østberg as the team's lead driver. Østberg gave the car its first World Championship-level victory at the 2019 Rally Argentina, a result that cemented the C3 R5's reputation as a front-running machine in the WRC support classes.
Although Citroën officially withdrew from the FIA World Rally Championship at the end of the 2019 season, the C3 R5 remained available to privateer teams competing in both WRC-2 and WRC-3 categories. The car continued to gather victories across multiple national and international rallies in the hands of independent crews.
Ahead of the 2021 rally season, the FIA introduced revised technical nomenclature across its regulations. In line with this change, the Citroën C3 R5 was officially renamed the Citroën C3 Rally2, joining a wider rebranding of R5-class machinery under the Rally2 banner. The car itself remained mechanically unchanged; only the classification designation was updated.
The C3 R5 represented a significant step forward for Citroën's customer motorsport programme after the difficulties encountered with the DS3 R5 and 208 T16. Its rapid sell-through rate and immediate on-stage competitiveness demonstrated that Citroën Racing Technologies had produced a well-engineered privateer package. Victories in the European Rally Championship, French Rally Championship, and at WRC-2 level gave the car a broad competitive footprint across multiple tiers of international rallying. The car's continued use well beyond Citroën's own factory exit from the WRC underscored its durability as a competitive customer product.