Both Illien and Morgan had previously worked at Cosworth on the DFX turbocharged Indy car engine. Disagreements over development direction led them to leave and form Ilmor with backing from Roger Penske. The Ilmor 265-A debuted at the 1986 Indianapolis 500 and became one of the most successful engines in CART history, recording 64 wins from 78 races between 1987 and 1991. The engine was initially badged as the Ilmor-Chevrolet Indy V-8 and later as the Chevrolet Indy V-8. Penske drivers Rick Mears, Danny Sullivan, and Al Unser were central to its success, and the programme attracted teams including Patrick Racing and Newman/Haas.
A landmark moment came at the 1994 Indianapolis 500, when Ilmor produced the Mercedes-Benz 500I engine for Team Penske. By exploiting a regulatory loophole that permitted stock-block-derived engines of larger displacement at Indianapolis specifically, Ilmor created a pushrod V8 generating approximately 200 bhp more than conventional CART opposition. Al Unser Jr. won the race. The loophole was subsequently closed.
Ilmor entered Formula One in 1991 with a V10 engine supplied exclusively to the Leyton House team, formerly March. The company also supplied engines to Tyrrell from 1992. These early F1 campaigns were modest in result — Tyrrell scored eight championship points and Leyton House three — but they established Ilmor's presence in the sport and attracted the attention of Mercedes-Benz.
Mercedes-Benz partnered with Ilmor after abandoning earlier engine plans, signing a deal to power the Sauber team. Sauber scored 12 championship points in 1993. Mercedes then entered officially in 1994 with an updated engine, simultaneously acquiring Chevrolet's 25 percent share of Ilmor. The partnership shifted up a level when McLaren chose to take on the Mercedes-branded Ilmor engines from 1995 — guaranteed factory support being the decisive factor over alternatives including the troubled Peugeot supply that McLaren had just abandoned.
With McLaren as its primary F1 customer, the Ilmor-built Mercedes engines began delivering competitive results. The combination scored several podiums in 1995 and 1996, three wins in 1997, and then achieved dominance in 1998 and 1999, powering Mika Hakkinen to back-to-back Drivers' Championships alongside the 1998 Constructors' title. These championships represented the peak of the Ilmor F1 programme.
Throughout this period Ilmor operated in a role analogous to Mecachrome's relationship with Renault — designing, building, and preparing the engines under the Mercedes-Benz badge, with Mercedes providing the commercial and branding framework. The arrangement gave McLaren a de facto works Mercedes relationship even before the manufacturer took full ownership of the constructor.
In May 2001, Paul Morgan was killed in an accident while landing a vintage Hawker Sea Fury aircraft at Sywell Aerodrome, Northamptonshire. Following his death, DaimlerChrysler increased its stake in Ilmor progressively. In 2002 the company was renamed Mercedes-Ilmor, and by 2005 DaimlerChrysler became the sole owner, renaming it Mercedes-Benz High Performance Engines Ltd.
In 2005, Mario Illien negotiated to purchase the Special Projects division of the company in partnership with Roger Penske, forming a new, independent Ilmor Engineering Ltd. This revived company partnered with Honda Performance Development on IndyCar engines between 2003 and 2011. Chevrolet returned to IndyCar via Ilmor from 2012 with the Chevrolet Indy V6.
Ilmor also made a brief foray into MotoGP in 2006 and 2007, developing an 800cc machine. Former GP500 winner Garry McCoy scored points at the 2006 Portuguese and Valencia Grands Prix on the machine — becoming the first rider to score points on an 800cc MotoGP motorcycle — but funding difficulties ended the programme after a single race in 2007.
Ilmor's trajectory — from two engineers leaving Cosworth to building championship-winning Formula One engines at the most competitive level — is one of the more remarkable stories in motorsport engineering. The company's IndyCar record alone would constitute a significant legacy; the Mercedes F1 partnership elevated it further. Illien's continued involvement in IndyCar engine development through the reconstituted Ilmor Engineering Ltd means the name remains active in top-level motorsport four decades after its founding.