The Zschopau factory has roots stretching to 1906, when Danish industrialist Jørgen Skafte Rasmussen acquired an empty cloth factory there. By 1920 the facility was producing two-stroke engines for motorcycles, and in 1923 the company was renamed DKW. By 1929, DKW was the largest motorcycle manufacturer in the world, producing 60,000 machines annually from the Zschopau plant.
After the Second World War, the factory fell within the Soviet occupation zone and became East German state property under the Industrieverband Fahrzeugbau (IFA) umbrella. In 1950 the works resumed production of the RT 125 model developed before the war — a design that had entered the public domain as war reparations and was being independently developed in Britain as the BSA Bantam, in the United States as the Harley-Davidson Hummer, and in the Soviet Union as the M-1A Moskva. In 1956 the works was renamed VEB Motorradwerk Zschopau, producing the MZ acronym used thereafter.
Racing activities at the Zschopau works began in 1927 under DKW. The MZ Grand Prix effort took shape in the late 1950s under Walter Kaaden, who served as racing department head. Working with extremely limited resources in the East German command economy — without the backing that Western and Japanese manufacturers could draw upon — Kaaden pursued a systematic understanding of exhaust resonance in two-stroke engines. His investigation of expansion chambers using an oscilloscope allowed him to develop profiles that maximised engine efficiency. His 1961 125 cc race engine produced approximately 25 bhp at 10,800 rpm, making it the first to achieve 200 bhp per litre of displacement.
Between 1955 and 1976, MZ machines were ridden to 13 Grand Prix victories and 105 rostrum finishes. In 1958, MZ scored its first GP wins in the 125 cc and 250 cc classes and finished second overall in the 250 cc world championship. MZ also achieved strong results in off-road endurance competition, winning the International Six Day Trial in 1963, 1964, 1965, 1966, 1967, 1969, and 1987.
The MZ racing programme reached its apex — and abrupt interruption — in the 1961 season. Ernst Degner, the factory's premier 125 cc rider, held a strong position in the world championship. During the final round at the Swedish GP, Degner defected to West Germany rather than return to East Germany. He brought with him detailed knowledge of Kaaden's two-stroke engine technology. Kaaden's work was effectively stolen and transferred to Suzuki, for whom Degner rode in 1962 and delivered their first world championship. The incident deprived MZ of the recognition its engineering deserved and set the Japanese manufacturers on a faster path to two-stroke dominance.
After the Kaaden era, MZ continued racing intermittently and became one of the few producers offering sidecar-equipped motorcycles. The millionth motorcycle rolled off the production line in 1970. In 1990, following German reunification, MZ was privatised. The company went through receivership in 1993, was acquired by the Malaysian Hong Leong Group in 1996, and experienced several subsequent ownership changes and financial difficulties.
In 2010, former Grand Prix stars Ralf Waldmann and Martin Wimmer, alongside investor Dr. Martina Häger, acquired the MZ brand for a reported four million euros. Under Wimmer's management MZ competed in the Moto2 world championship with rider Anthony West, who nearly won a race in the season's final event in 2011. Financial pressures forced the team's withdrawal in 2012, and insolvency proceedings concluded in late 2012. On 17 November 2012 the insolvency became irrevocable, and production at the historic Zschopau works — which had produced motorcycles continuously since 1922 — came to a permanent end.