In 1995, the South Korean Agency for Defense Development was given the task of developing a modern armored fighting vehicle based upon Korean state-of-the-art domestic technologies. It was intended for this development program to further modernize the Republic of Korea Army; despite the superior capability of existing K1 and K1A1 designs versus existing North Korean tanks; most of which are aging T-55s and Type 59s. Emphasis upon indigenous technologies would also allow the proposed vehicle to enter the export market without licensing issues.
Early design variants included a version with an unmanned turret, which was later scrapped in favor of manned turret designs. It was also planned for the vehicle to be equipped with Rheinmetall's experimental 140 mm smoothbore gun, though this had to be abandoned when Rheinmetall ceased development upon the rationale that its current weapon, the 120 mm/L55 would be more than adequate to counter prospective armored threats for the foreseeable future. The K2 was subsequently reconfigured for the 120 mm/L55, though it is capable of mounting the 140 mm gun with minimum modifications should the need arise.
The design became production-ready in 2006, following 11 years in development and a research budget expenditure of approximately US$230 million, and entered production phase on March 2, 2007 in Changwon, South Korea.
It was planned that the K2 would feature a domestically-designed powerpack, based upon the German-designed MTU-890, comprising a Doosan Infracore Corporation 1,500 horsepower (1,100 kW) 12-cylinder diesel engine and a S&T Dynamics transmission. However, this encountered recurrent technical trouble in testing, leading to a delay in operational deployment of the K2 for 2 years.
In March 2011, South Korea's Defense Acquisition Program Administration (DAPA) announced that mass production of the K2, which the Army was expecting to deploy in 2012, would not happen due to problems concerning its engine and transmission. In April 2012, DAPA announced that due to ongoing issues with the reliability and durability of the domestically-produced powerpack, the first 100 production K2s would use German-made MTU powerpack and that service entry would be delayed until March 2014.
On 26 September 2014, the K2 was demonstrated to 40 foreign military visitors from 9 countries at DX Korea 2014. When compared to the K1A1 tank, the K2's main gun reloaded quicker and reached targets faster. Although both are 120 mm, the K2's barrel is 1.3 m (4.3 ft) longer (6.6 m (22 ft) total length), resulting in a faster muzzle velocity of 1,400 m/s (4,600 ft/s) (compared to 1,140 m/s (3,700 ft/s) for the K1A1) for higher accuracy and armor penetration. Other features demonstrated included the tank's ability to cross a 4 m (13 ft)-deep river, a posture control function that can lower its height by 40 cm (16 in), and a laser warning systems that turned the turret towards the source almost instantaneously. Personnel from Hungary and others expressed interest in the K2 after the event.
The first 15 K2 Black Panther tanks were put into service in June 2014. Faulty indigenous engines and transmissions previously halted production, but the lowering of required acceleration performance allowed it to enter service. The "power pack" of tank is intended to be locally developed. Until that occurs, they will employ German-made MTU power plants, making possible the deployment of around 100 K2s by 2017.