The Xsara WRC was nominally based on the Citroën Xsara road-going hatchback but shared very little with it beneath the skin. Its lineage traces to the Citroën Xsara Kit Car of 1999, a two-wheel-drive naturally aspirated predecessor that won overall in the Rallye Catalunya and Tour de Corse under the Kit Car regulations. When the FIA increased the minimum weight for the 2000 season that car lost its competitive advantage, and when the Kit Car category was discontinued in 2001 in favour of Super 1600 and Super 2000 classes, Citroën moved to develop a full World Rally Car for the top tier.
The Xsara WRC debuted at the 2002 Monte Carlo Rally with Sébastien Loeb at the wheel, and was driven throughout its competition life by a roster that included Loeb, Carlos Sainz, Colin McRae, Jesús Puras, and François Duval.
In its debut at Monte Carlo in 2002, Loeb provisionally won the rally but was penalised two minutes for an illegal tyre change, dropping him from the result. He took the team's first confirmed victory at the Rallye Deutschland that year.
Citroën entered the 2003 season as a full works team for the first time, pairing Loeb with Colin McRae and Carlos Sainz, two former world champions. The Xsara won four rallies over the course of the year. The championship battle went to the final round, the Wales Rally GB, where both Loeb and Sainz had mathematical chances at the drivers' title. After championship rival Richard Burns suffered a medical incident and withdrew, and Sainz retired from the rally, Citroën prioritised securing the manufacturers' title — which they won by 15 points. Loeb finished second in the rally and lost the drivers' title to Petter Solberg by a single point.
In 2004 Loeb took his first drivers' title in the Xsara, winning six rallies and finishing 36 points clear of the field. He successfully defended the title in 2005 with a dominant campaign of ten wins — a single-season record at the time — including victories on snow, gravel, and tarmac and a clean sweep of every stage at the Tour de Corse.
In 2006 Citroën ran the Xsara in privateer guise through the Kronos Total Citroën team while the successor Citroën C4 WRC was under development. Loeb won five consecutive rallies during the season and took a third consecutive drivers' championship, as well as a third manufacturers' title, before the car was retired from factory use at the end of the year. Loeb accumulated 28 WRC victories in the Xsara across its competition life.
Although the Citroën C4 WRC replaced the Xsara as the factory car from 2007, the Xsara continued in the hands of private entrants. Notably, 2003 WRC champion Petter Solberg drove a 2006-specification Xsara for the majority of the 2009 season under his own Petter Solberg World Rally Team banner.
Beyond WRC, the Xsara also had a strong presence in rallycross. Kenneth Hansen used it to win the FIA European Rallycross Championship every year from 2000 to 2005, a run of six consecutive titles. The car made a solitary appearance in the FIA World Rallycross Championship in 2014, when Lebanese businessman Nabil Karam entered the World RX of France but failed to advance beyond the qualifying heats.
The Xsara WRC's record of three consecutive drivers' and manufacturers' championships defined the early Loeb era and set Citroën on its path to becoming the dominant constructor of the mid-2000s WRC. Its development into the C4 WRC continued that lineage, and together the two cars underpinned Citroën's nine consecutive manufacturers' titles between 2003 and 2012.