Beginning in 1948, the first 242 cars were wood-framed open 2-seater bodies with aluminium panels. Production switched to the all-steel 1cwt or 112 lb (51 kg) heavier all-steel in early 1950. The XK120 was ultimately available in three body styles, all two-seaters and available either as Left (LHD) or Right Hand Drive (RHD): an open 2-seater described in the US market as a roadster (OTS); a fixed head coupé (FHC) from 1951; and a drophead coupé (DHC) from 1953. Certain Special Equipment roadster and fixed head coupe cars were produced between 1948 and 1949 as an early production build for enthusiasts, denoted by an 'S' preceding the chassis number. A version with a smaller engine (2-litre 4-cylinder) designated the XK100 and intended for the UK market was cancelled prior to production.
On 30 May 1949, on the empty Ostend-Jabbeke motorway in Belgium, a prototype XK120 timed by the officials of the Royal Automobile Club of Belgium achieved an average of runs in opposing directions of 132.6 mph (213.4 km/h) with the windscreen replaced by just one small aero screen and a catalogued alternative top gear ratio, and 135 mph (217 km/h) with a passenger-side tonneau cover in place. In 1950 and 1951, at Autodrome de Linas-Montlhéry, a banked oval track in France, open XK120s averaged over 100 mph (160 km/h) for 24 hours and over 130 mph (210 km/h) for an hour. In 1952 a fixed-head coupé took numerous world records for speed and distance when it averaged 100 mph for a week.
XK120s were also highly successful in racing and rallying. In 1949, Leslie Johnson drove an XK120 to its first race victory in the Daily Express-sponsored One-Hour Production Car Race at Silverstone Circuit, England. In January 1950, Johnson scored the model's first competition success in America, winning the production class in a race at Palm Beach Shores, Florida. In May 1950, XK120s driven by Phil Hill and Don Parkinson finished first and second in the Pebble Beach Cup at the inaugural Pebble Beach Road Races.
At the 1950 Le Mans 24 Hours, three mildly modified XK120s were entered. Johnson, with co-driver Bert Hadley, retired from third place in the 21st hour with clutch failure. Haines, with co-driver Peter Clark, finished 12th, and Walker's car, driven by Peter Whitehead and John Marshall, was 15th. Clemente Biondetti's car, the first XK120 to contest the Targa Florio, lay second when a connecting rod broke. Johnson took fifth place in the Mille Miglia, an outstanding achievement for a production car. Peter Walker won the Silverstone Production Car Race, and XK120s achieved a 1–2–3 victory in the Tourist Trophy at Dundrod.
In 1951, Ian Appleyard won the Alpine Rally with his wife, Pat, navigating, earning a Coupe des Alpes. They also won the Tulip Rally. In 1952, Appleyard’s XK120 completed the Alpine Rally without incurring a single penalty point, winning the first-ever Coupe d'Or (Gold Cup). In 1954, an XK120 FHC driven by Geordie Anderson, Chas Swinburne and Bill Pitt won Australia's first 24-hour motor race, the 1954 Mount Druitt 24 Hours Road Race. In America, Al Keller won the first Grand National road race in an XK120 FHC at Linden Airport, New Jersey, leading to a ban on foreign-made cars in this series until 2007.
The first 242 production XK120s, hand-built with aluminium bodies on ash framing, were constructed between late 1948 and early 1950. To meet demand, and beginning with the 1950 model year, all subsequent XK120s were mass-produced with pressed-steel bodies. Aluminium doors, bonnet, and boot lid were retained. The DHC and FHC versions, more luxuriously appointed than the constantly exposed open cars, had wind-up windows and wood veneers on the dashboard and interior door caps.
The XK120’s steel chassis was mostly copied from the Jaguar Mark V, using many of the same parts. The dual overhead-cam 3.4 L straight-6 XK engine was highly advanced for a mass-produced unit of the time, featuring a high-temperature, high-strength aluminum alloy cylinder head, hemispherical combustion chambers, inclined valves, and twin side-draft SU carburetors. Using 80 octane fuel a standard 8:1 compression ratio developed 160 bhp (119 kW). Most of the early cars were exported; a 7:1 low-compression version, with commensurately reduced performance, was reserved for the UK market, where the post-war austerity measures then in force restricted buyers to 70 octane "Pool petrol". The Jaguar factory's access to 80 octane fuel allowed it to provide cars with the higher compression ratio to the press, enabling journalists to test the model's optimum performance in Belgium. The XK engine's basic design by William Heynes, later modified into 3.8 and 4.2-litre versions, survived until 1992.
All XK120s had independent Heynes designed torsion bar front suspension, semi-elliptic leaf springs at the rear, recirculating ball steering, telescopically adjustable steering column, and all-round 12-inch drum brakes which were prone to fade. Some cars were fitted with Alfin (ALuminium FINned) brake drums to help overcome the fade.
The open two-seater provided little weather protection. Its lightweight folding canvas top and detachable sidescreens stowed out of sight behind the seats. The doors had no external handles; they were opened by an interior pull-cord, accessed through a flap in the sidescreens when the weather equipment was in place. The windscreen could be removed for aeroscreens to be fitted.
The drophead coupé (DHC) had a padded, lined canvas top, which folded onto the rear deck behind the seats when retracted, and roll-up windows with opening quarter lights. The flat glass two-piece windscreen was set in a steel frame that was integrated with the body and painted the same colour. Dashboards and door-caps in both the DHC and the closed coupé (FHC) were wood-veneered, whereas the open cars were leather-trimmed. All models had removable spats ("fender skirts" in America) covering the rear wheel arches, which enhanced the streamlined look. On cars fitted with optional centre-lock wire wheels (available from 1951), the spats were omitted as they gave insufficient clearance for the chromed, two-eared Rudge-Whitworth knockoff hubs. Chromium-plated wire wheels were optional from 1953. Factory standard 6.00 × 16-inch cross ply tyres were fitted on 16 × 5K solid wheels (Pre–1951), with 185VR16 Pirelli Cinturato radial tyres available as a later option. In addition to wire wheels, upgrades on the Special Equipment (SE) version (called the M version for Modified in the United States) included increased power, stiffer suspension and dual exhaust system.
On 21 October 1953, Jaguar test driver Norman Dewis drove a modified XK120 to a two-way average flying mile speed of 172.412 mph (277.470 km/h) at Jabbeke, Belgium, using a distinctive bubble-shaped, air-tight canopy. The car was later converted back to road configuration and sold.