By late 1958, the Lola Mk1 was beating the Lotus Eleven with what observers described as monotonous regularity. The Lola achieved this dominance by being smaller and lighter than the Eleven, and Colin Chapman's response was characteristically direct: he instructed Len Terry to design a car that was even smaller, even lighter, and even more aerodynamic than the Lola. The result was the Lotus 17, which in theory should have reclaimed the advantage for Chapman's marque.
Terry's design incorporated the Chapman strut rear suspension system, which had first appeared on the single-seat Lotus 12 and had also been used on the Elite coupe and the Lotus 15. The 17 was Lotus's first sports-racing car to use a glass-fibre body — although works Lotus Eleven cars had carried fibreglass bodies in 1958 — and it achieved a very low frontal area. Its declared dry weight of 340 kg (750 lb) made it the lightest multi-seat production Lotus ever built, though in practice surviving examples struggle to get below a wet 400 kg (880 lb).
At the car's first race in early April 1959, a fundamental handling flaw became apparent: the front struts bent and bound under racing loads, making the car unmanageable in competition. By the time engineers identified the root cause and devised a cure — replacing the front struts with more conventional wishbone geometry, a modification subsequently offered as a factory retrofit to all Lotus 17 owners — racing had moved on and the car's competitive opportunity had passed. The delay proved fatal to its chances, and the Lotus 17 never established itself as the dominant force it might have been.
Works entries at the 1959 24 Hours of Le Mans ran the 742 cc Coventry Climax FWMA engine and were running strongly in their class before electrical problems forced their retirement, denying the car a Le Mans class result. In period the Lotus 17 was available with the full range of small-capacity Coventry Climax engines: the 742 cc FWMA, the 1,098 cc FWA (the standard small-capacity racing unit of the day), the 1,216 cc FWE, and, for the North American market, the 1,460 cc unit.
Only 21 Lotus 17s were produced in total. Of those, approximately a dozen are believed to survive. The car's reputation has been partly rehabilitated in modern historic racing, where it is now understood to have genuine speed when properly developed. Two examples compete in European historic events and two race in the United States, allowing the car to demonstrate the potential that eluded it during its original competitive life. The Lotus 17 was replaced in 1960 by the Lotus 19.