The Audi Quattro's arrival in rallying began with a development car at the Rali Urbibel Algarve in Portugal in October 1980, followed by its formal competition debut at the 1981 Jänner Rallye in Austria. The car was a direct adaptation of the road-going Quattro, using a turbocharged inline-five cylinder engine and permanent four-wheel drive — a combination that had not previously been applied to top-level rallying. In 1981, Michèle Mouton became the first female driver to win a world championship rally, doing so at the wheel of an Audi Quattro.
The original competition Quattro produced approximately 304 PS. Through 1981 and into 1982, Audi introduced the A1 evolution to comply with the new Group B regulations, raising power output to around 355 PS. The car won the 1982 WRC manufacturers' championship, demonstrating that four-wheel drive was not merely competitive but decisively superior to rear-wheel-drive machinery on loose surfaces.
The A2 evolution followed, capable of winning in the hands of Stig Blomqvist, Hannu Mikkola, and Walter Röhrl. The A2 won a total of eight world rallies — three in 1983 and five in 1984. Hannu Mikkola claimed the 1983 drivers' championship, and Stig Blomqvist won the 1984 title. Audi also won the manufacturers' championship in 1984, defeating rivals who were now scrambling to develop their own four-wheel-drive Group B machines.
The competitive threat from Peugeot with the 205 T16 and Lancia with the Delta S4 led Audi to develop the Sport Quattro S1 for homologation in 1984. Built in a production run of 224 examples for sale at DM 203,850, the S1 featured a carbon-kevlar body shell, wider wheel arches, and a shorter wheelbase derived from the Audi 80 rather than the Ur-Quattro. Engine output was rated at 306 PS in road form, with competition versions producing substantially more. Michèle Mouton drove a Sport Quattro S1 to victory at the 1985 Pikes Peak International Hill Climb, setting a course record.
At the end of 1985, Audi introduced the S1 E2, the most extreme evolution of the Group B Quattro. Its inline-five cylinder engine displaced 2,110 cc and was officially rated at 480 PS, though actual outputs exceeded 500 PS. The S1 E2 incorporated an anti-lag system that kept the turbocharger spinning under closed-throttle conditions, allowing immediate power delivery on throttle application — a significant technological advance. An aerodynamic package with prominent front and rear wings added downforce. The S1 could accelerate from 0–100 km/h in 3.1 seconds; final-specification cars from 1986 were rated at 600 PS.
Walter Röhrl and co-driver Christian Geistdörfer won the 1985 San Remo Rally in the S1 E2. The car made its competition debut at the 1985 Rally Argentina with Blomqvist driving.
The 1986 season proved fatal for Group B rallying as a category. At the Rally Portugal, an RS200 crashed into spectators and three were killed. Shortly afterward, Henri Toivonen and Sergio Cresto died in a Delta S4 accident in Corsica. Audi withdrew from the WRC following the 1986 Portugal event, unwilling to continue under the shadow of what the cars had become. The works team never returned to the WRC as a top-level manufacturer entry.
A modified S1 E2 did win the 1987 Pikes Peak International Hill Climb with Walter Röhrl driving, demonstrating the car's continued potency in a controlled environment. Audi also developed the Sport Quattro RS 002, a mid-engined Group S prototype rated at 700 PS, in anticipation of planned successor regulations — but Group S was cancelled along with Group B following the 1986 tragedies.
Audi Sport's Group B campaign irrevocably transformed rally car engineering. Every competitive rally car developed since 1981 has used four-wheel drive, a direct consequence of the Quattro's demonstration that the technology was feasible, effective, and essential. The Sport Quattro S1 E2 in particular represents the apex of an arms race that the sport's governing body ultimately deemed incompatible with safety on open public roads. Audi's withdrawal from the WRC at the height of its capability, driven by safety concerns rather than competitive failure, gave the program an unusual historical character — a technical revolution brought to a halt before its conclusions could be fully drawn.