Construction on the Hungaroring began on 1 October 1985. The circuit was built in approximately eight months, faster than any other Formula One circuit of the era. The project emerged from a desire by Formula One commercial rights holder Bernie Ecclestone to stage a race in the Eastern Bloc; initial plans envisaged a street circuit through the Népliget park in central Budapest, but the Hungarian government opted instead for a purpose-built venue just outside the city near a major highway. The circuit sits in a valley in Mogyoród, a topographical feature that allows approximately 80 percent of the track to be visible from almost any single vantage point within the venue.
The first official race at the circuit was held on 24 March 1986, organised in memory of János Drapál, the first Hungarian winner of motorcycle Grand Prix races. The Formula One Hungarian Grand Prix followed that same year, making the Hungaroring the host of the first World Championship Grand Prix staged behind the Iron Curtain.
The original layout was a twisty, technical course running through the valley terrain, measuring 3.975 km. At the time of construction a temporary chicane was inserted after what was designated turn three, necessitated by the discovery of a spring beneath the direct route that had been planned. This chicane was removed in 1989 when the stream was culverted, establishing the layout that would persist until 2003.
The circuit's character was slow and sinuous, making it famously difficult for overtaking in dry conditions. It earned the informal nickname "Monaco without the barriers" for its resemblance to the demands of the Monte Carlo street circuit without the proximity of armco fencing. The dusty, sandy soil at the site meant the track surface often remained low on rubber grip, and conditions could deteriorate quickly between sessions.
The original Hungaroring layout was the scene of some of the most discussed races in Formula One during the late 1980s and 1990s. Nelson Piquet's 1986 victory in the inaugural Hungarian Grand Prix was the first Formula One win behind the Iron Curtain. Ayrton Senna won the race multiple times and publicly declared it among his favourite circuits.
In 1989, Nigel Mansell executed a pass on Senna at the hairpin to win from twelfth on the grid, a manoeuvre widely cited as one of the most audacious overtakes in the sport's history. Damon Hill came extraordinarily close to winning the 1997 race for the privateer Arrows team before a hydraulic failure denied him victory in the closing laps. Michael Schumacher won at the Hungaroring in 1994, 1998, and 2001 on the original or near-original layout, and both Schumacher in 2001 and Nigel Mansell in 1992 clinched the Formula One Drivers' Championship at this circuit. Williams secured the Constructors' Championship here in 1996.
Turn 4 of the original layout was named after Mansell following his loss of a wheel there during the 1987 Hungarian Grand Prix. Turn 11 was subsequently named after Jean Alesi following a major accident there during qualifying for the 1995 race.
In 2003 the circuit underwent its most significant change: the main straight, which ran to the first hairpin, was lengthened by approximately 200 metres to 908 metres, and the hairpin at its end was also tightened. A further modification tightened what had been turn 12. These changes collectively brought the circuit length to 4.381 km. The rationale was to create more opportunity for overtaking by providing a longer braking zone into the first corner. The 2003 layout has remained in use for all subsequent Formula One Hungarian Grands Prix.