The design of the Gloster Grouse was an experiment to combine the advantages of the monoplane with those of a biplane. It was designed by English aviation engineer and aircraft designer Henry Folland, the designer of the S.E.5 among other aircraft. The top wing had a thick, high lift aerofoil, while the bottom wing was smaller, with a thinner medium lift aerofoil set at a smaller angle of attack than the upper wing. This arrangement was meant to produce high lift for take-off with low drag.
To test this arrangement, new wings were fitted to a modified Gloster Sparrowhawk fuselage to produce the Gloster Grouse. The resulting aircraft was a small biplane with single bay wooden wings. The fuselage was rather short, and while the aircraft used the fuselage of a two-seat Sparrowhawk II, the forward cockpit was faired over, leaving a single seat for the pilot in an open cockpit.The Grouse retained the Bentley BR2 rotary engine of the Sparrowhawk driving a two blade propeller.
The prototype Grouse Mk I (registration G-EAYN) first flew in 1923, proving during testing that Folland's theories were correct. After evaluation by the RAF, orders were placed for three fighter derivatives, to be powered by Armstrong Siddeley Jaguar radial engines, designated Gloster Grebe.
In 1924, Gloster rebuilt the Grouse into a two seat basic trainer, the Grouse II, powered by an Armstrong Siddeley Lynx radial to replace the RAFs aging Avro 504s, emerging in this form in 1925.