Enzo Osella originally managed the Abarth racing department and, when Carlo Abarth sold his company in 1969, Osella took over the operation. From the early 1970s, the company produced sports cars with technical lineage from Abarth machinery. In 1974 Osella formally took over the factory Abarth sports car programme and began building its own cars. The team entered the European Formula Two Championship in 1975 with Giorgio Francia and Duilio Truffo, using an Osella FA2 powered by a BMW engine. After a difficult period, a more developed version of the FA2 allowed American driver Eddie Cheever to win three Formula Two races in 1979 and finish fourth in the championship.
Backed by tobacco sponsorship from the Italian brand MS, Enzo Osella entered Formula One for the 1980 season with a car designed by Giorgio Stirano, the FA1, powered by a Ford Cosworth DFV. Eddie Cheever drove in the inaugural season but struggled with reliability and aerodynamic inefficiency. The team's early approach of manufacturing many components in-house kept costs manageable but often resulted in underperforming parts.
Jean-Pierre Jarier scored the team's first championship points with a fourth-place finish at the 1982 San Marino Grand Prix — a race in which only fourteen cars started — in the FA1C. The 1982 season was also marked by tragedy when Riccardo Paletti was killed in a start-line accident at the Canadian Grand Prix.
From 1983, Osella became a beneficiary of factory Alfa Romeo engines, running naturally-aspirated units in 1983–84 and the turbocharged Alfa 890T from 1984 to 1988. The arrangement helped the team survive the turbo era financially but failed to produce significant improvements in competitiveness. The 890T suffered persistent reliability problems, and power output had to be reduced simply to finish races. From the 1984 Osella FA1F onward, all cars through to the 1988 FA1L were derived from the original Alfa Romeo 183T design provided by Alfa's chief designer Carlo Chiti. In 1988, after Fiat grew tired of the negative publicity the engine was receiving, Alfa Romeo's name was removed and the unit was relabelled the Osella V8.
Among the drivers who began their Formula One careers with Osella during the mid-to-late 1980s were Alex Caffi and Gabriele Tarquini, both of whom went on to more prominent careers elsewhere.
For 1989, Osella introduced the FA1M fitted with a Cosworth DFR engine. Nicola Larini showed strong qualifying pace, notably reaching tenth on the grid for the Japanese Grand Prix, but race results remained poor. At the 1989 Canadian Grand Prix, Larini had climbed to third place before electrical failure caused by water ingress ended the run. Larini also suffered a high-speed collision with Nelson Piquet's Lotus at the Australian Grand Prix.
In 1990, Enzo Osella sold shares in the team to Gabriele Rumi, whose Fondmetal company became the primary sponsor. At the end of that season Rumi acquired the remainder of the team and renamed it Fondmetal, bringing Osella's Formula One involvement to a close.
Throughout its Formula One years and beyond, Osella remained active in sports car racing and hillclimbing. The PA9 sports prototype, introduced in 1981, achieved numerous class victories and podiums in the World Sportscar Championship and was highly successful in European hillclimb competition. Mauro Nesti won the European Hill Climb Championship six consecutive times between 1983 and 1988 using a PA9.
In the 1990s Osella moved to Atella in southern Italy and built a new facility producing sports cars for hillclimb and circuit racing. Pasquale Irlando won all nine rounds of the 1995 European Hillclimb Championship in an Osella PA20, and subsequently took the championship title in 1997, 1998, and 1999. The company returned to the Turin area in 2001, relocating to Verolengo, and continued building competitive hillclimb machinery into the 2020s. At the end of 2022, Osella Motorsports LTD merged with Osella Engineering, continuing the lineage established by Enzo Osella nearly six decades earlier.
Osella represents one of the more enduring small constructors in motorsport history, sustaining activity across Formula One, Formula Two, sports car racing, and hillclimbing over more than fifty years. Though never competitive at the front of Formula One, the team provided an entry point into the championship for numerous drivers and kept Italian constructor identity alive through the 1980s turbo era.