The company was founded as a London-based racing internal combustion engine maker in 1958 by Mike Costin and Keith Duckworth. Its company name, "Cosworth", was derived as a portmanteau of the surnames of its two founders. Both of the co-founders were former employees of Lotus Engineering Ltd., and Cosworth initially maintained a strong relationship with Lotus's Colin Chapman; initial revenues of the company came almost exclusively from Lotus. When the company was founded in 1958, Duckworth left Lotus, leaving Costin (who had signed a term-employment contract with Chapman) at the company. Until 1962, Costin worked on Cosworth projects in his private time, while being active as a key Lotus engineer on the development of Lotus 15 through 26 (Elan), as well as leading the Team Lotus contingent at foreign races.
Initial series production engines (Mk.II, Mk.V, Mk.VIII, and Mk.XIV) were sold to Lotus exclusively, and many of the other racing engines up to Mk.XII were delivered to Team Lotus. The success of Formula Junior engines (Mk.III, IV, XI, and XVII) started bringing in non-Lotus revenues, and the establishment of Formula B by the Sports Car Club of America (SCCA) allowed the financial foundation of Cosworth to be secured by the increased sales of Mk.XIII, a pure racing engine based on Lotus TwinCam, through its domination of the class. This newly found security enabled the company to distance itself from the Lotus Mk.VII and Elan optional road engine assembly business, and allowed its resources to be concentrated on racing engine development. The first Cosworth-designed cylinder head was for SCA series; with a single overhead camshaft (SOHC) reverse-flow configuration, similar to the Coventry Climax FWE engine. A real success was achieved with the next gear-driven double overhead camshaft (DOHC) four-valve FVA in 1966, when Cosworth, with a help from Chapman, convinced Ford to purchase the rights to the design, and sign a development contract, including an eight-cylinder version. This resulted in the DFV, which dominated Formula One for many years.
The DFV won on its first outing, at the 1967 Dutch Grand Prix in the hands of Jim Clark, fitted to a Lotus 49, and from 1968 was available for purchase to any F1 team that wished it. During the 1970s, it was common for almost the entire field to use one of these engines. The DFV won a record 155 World Championship races, the last being Detroit in 1983, powering a Tyrrell driven by Michele Alboreto. The DFY, introduced in 1982 was a further evolution of the DFV for Formula One, with a shorter stroke. The advent of turbocharged engines in Formula One presented challenges to the DFV’s continued dominance.
The DFV design used a similar cylinder head to the one Duckworth had prototyped on the four-cylinder FVB unit on a custom Cosworth cylinder block and crankcase, forming a single 90° V8 engine. This engine and its derivatives were used for a quarter of a century. In September 1998, Vickers sold Cosworth to Audi. The German carmaker kept the engineering, manufacturing and casting unit, which it called Cosworth Technology under the new CEO Wayne Merry, and sold the race engine division, Cosworth Racing, and its electronics division, Pi Research, to Ford.
Although the DFV was designed as an F1 engine, it was also used in endurance racing. Despite the handicap of its flat-plane crank design leading to destructive vibrations, the DFV won the 24 Hours of Le Mans twice in its original 3.0 Litre form for Mirage in 1975 and Rondeau in 1980, who were able to attain sufficient reliability by de-tuning the motor. Cosworth developed the DFX, by destroking the engine to 2,650 cc (161.7 cu in) and adding a turbocharger, which became the standard engine to run in IndyCar racing, ending the reign of the Offenhauser, and maintaining that position until the late 1980s.
Cosworth is best known in Europe for its relationship with Ford – in particular because of the Cosworth name in the vehicle title on the high-performance Ford Sierra RS Cosworth and Ford Escort RS Cosworth, but also in the creation of other Ford models; the Escort RS1600, Escort RS1800, RS200, and Scorpio 2.9i 24V. In the US, the name has also appeared in the title of a road car as the Cosworth version of the Chevrolet Vega. Cosworth assisted with the later 2.5-16 engine (WAB), and the short-stroke 2.5-16 Evo engines (WAC) although these were all manufactured in house by Mercedes-Benz. In 2017, Cosworth established an engineering partnership with Aston Martin on one of the world's most powerful hybrid electric road car engines for the Aston Martin Valkyrie. In 2020, Gordon Murray Automotive commissioned Cosworth to design and build a 3,994 cc (243.7 cu in) V12 for use in their new T.50 sports car.