The Mirage 5 grew out of a request to Dassault from the Israeli Air Force. Since the weather over the Middle East is clear and sunny most of the time, the Israelis suggested removing avionics, normally located behind the cockpit, from the standard Mirage IIIE to reduce cost and maintenance, and replacing them with more fuel storage for attack missions. In September 1966, the Israelis placed an order for 50 units of the new aircraft.
The first Mirage 5 flew on 19 May 1967. It looked much like the Mirage III, except it had a long slender nose that extended the aircraft's length by about half a metre. A pitot tube was distinctively moved from the tip of the nose to below the nose in the majority of Mirage 5 variants.
The Mirage 5 retained the IIIE's twin DEFA guns, but added two additional pylons, for a total of seven. Maximum warload was 4,000 kg (8,800 lb). Provision for the SEPR rocket engine was deleted.
Rising tensions in the Middle East led French President Charles de Gaulle to embargo the Israeli Mirage 5s on 3 June 1967. The Mirages continued to roll off the production line, even though they were embargoed, and by 1968 the batch was complete and the Israelis had provided final payments.
In late 1969, the Israelis, who had pilots in France testing the aircraft, requested that the aircraft be transferred to Corsica, in theory to allow them to continue flight training during the winter. The French government became suspicious when the Israelis also tried to obtain long-range fuel tanks and cancelled the move.The Israelis finally gave up trying to get the aircraft and accepted a refund.
Some sources claim cooperation with France resumed outside the public's eye and Israel received 50 Mirage 5s in crates from the AdA, while the AdA took over the 50 aircraft originally intended for Israel, as Mirage 5Fs. Officially, Israel claimed to have built the aircraft after obtaining complete blueprints, naming them IAI Nesher.