The car was conceived by Jean Terramorsi, Renault's vice-president of production, as a response to the rallying success of the mid-engined Lancia Stratos. Developed under the internal code name Projet 822, it was intended to transform the front-wheel-drive Renault 5 Alpine supermini into a competitive rally machine while also promoting sales of the standard Renault 5. To meet FIA homologation requirements for Group 3 and Group 4 categories, Renault needed to produce a street-legal series-production version. The distinctive rear bodywork was styled by Marc Deschamps at Bertone, working under Chief Designer Marcello Gandini, using a Renault 5 Alpine as the starting point from October 1977. The car was publicly launched at the Brussels Motor Show in January 1980.
Despite sharing the greenhouse, door shapes, and rear hatch profile of the standard first-generation Renault 5, the R5 Turbo's mechanicals were entirely different. The engine was relocated from the front to a mid-mounted position behind the driver, driving the rear wheels. The powerplant was a 1,397 cc Cléon-Fonte inline-four equipped with Bosch K-Jetronic fuel injection and a Garrett AiResearch T3 turbocharger, producing 160 PS and 221 N⋅m of torque in road trim — making it the most powerful French production car at the time of its launch. The rear suspension was derived from the Alpine A310 V6, and the five-speed manual transmission was sourced from the Renault 30 TX and rotated 180 degrees. Rear quarter panels were widened by 11.25 cm to accommodate wide rear tyres, and integrated air-intake grilles dominated the rear flanks. The first 400 production cars were manufactured at the Alpine factory in Dieppe to satisfy Group 4 homologation.
Once the initial homologation run was complete, Renault introduced a second version, the Turbo 2, which replaced many of the Turbo 1's light-alloy components with standard Renault 5 parts and adopted the R5 Alpine interior in place of the bespoke Bertone fittings. The Turbo 2 was cheaper to produce but offered comparable performance, with a top speed of 200 km/h and a 0–100 km/h time of 6.9 seconds. A specific run of 200 Turbo 2 units, identified by the chassis code 8221, were built with an alloy roof and a 1437 cc engine to homologate the car for the Group B class, where it would compete against the Audi Quattro and Lancia 037.
In total, 4,987 R5 Turbos were manufactured across the production run: 1,820 Turbo 1 units and 3,167 Turbo 2 units.
The R5 Turbo made an immediate impression in the World Rally Championship when Jean Ragnotti drove it to victory at the 1981 Monte Carlo Rally on its first WRC outing. The car went on to win national championships in France, Portugal, Switzerland, Hungary, and Spain in the early 1980s, and collected victories at prestigious international rallies across Europe.
Factory development pushed power outputs well beyond the road-car figure. The version prepared for the Critérium des Cévennes produced 180 PS, while the Tour de Corse variant reached 210 PS. By 1984, the R5 Maxi Turbo was producing 350 PS. The final Maxi Turbo Superproduction variant reached 385 PS and won the 1987 French Supertouring Championship.
The car competed in the sub-2000 cc regulatory category thanks to the 1.4 multiplication factor applied to turbocharged engines. For the Maxi Turbo, Renault intentionally enlarged the engine to 1527 cc, which translated to 2138 cc under the multiplier, moving the car into the 2000–2500 cc bracket and permitting the use of wider wheels at the cost of a higher minimum weight. As Group B four-wheel-drive cars arrived in force, the two-wheel-drive R5 Turbo found itself at a growing disadvantage on loose surfaces, though it remained competitive in tarmac events.
After the factory withdrew support, the car continued to be developed by private teams and enthusiasts, remaining competitive in regional championships and local events for nearly two decades.
The R5 Turbo's mid-engined layout for a small Renault eventually found a successor in the 1998 announcement of the Renault Clio V6. In 2004, Sports Car International named the R5 Turbo ninth on its list of top sports cars of the 1980s. The car's combination of radical engineering, rally success, and vivid visual identity has ensured its status as one of the defining homologation specials of the pre-Group B era.