The Ki-61 was designed by Takeo Doi and his deputy Shin Owada in response to a late 1939 tender by the Koku Hombu for two fighters, each to be built around the Daimler-Benz DB 601Aa. Production aircraft would use a Kawasaki licensed DB 601, known as the Ha-40, which was to be manufactured at its Akashi plant. The Ki-60 was to be a heavily armed specialised interceptor, with a high wing loading; the Ki-61 was to be a more lightly loaded and armed general-purpose fighter, intended to be used mainly in an offensive, air superiority role at low to medium altitudes.
Both single-seat, single-engine fighters used the same basic construction, being of all-metal alloys with semi-monocoque fuselages and three-spar wings, with alloy-framed, fabric-covered ailerons, elevators and rudders. Priority was given to the Ki-60, which first flew in April 1941, while design work on the Ki-61 did not begin until December 1940. Although the Ki-61 was broadly similar to the Ki-60, it featured several refinements exploiting lessons learned from the disappointing flight characteristics of the earlier design.
The all-metal, semi-monocoque fuselage was basically oval in cross-section, changing to a tapered, semi-triangular oval behind the cockpit canopy, with a maximum depth of 1.35 m (4 ft 5 in). An unusual feature of the Ki-61 was that the engine bearers were constructed as an integral part of the forward fuselage, with the cowling side panels being fixed. For servicing or replacement, only the top and bottom cowling panels could be removed. A tapered, rectangular supercharger air intake was located on the port-side cowling. Behind the engine bulkhead were the ammunition boxes feeding a pair of synchronized 12.7 mm (.50 in) Ho-103 machine guns which were set in a "staggered" configuration (the port weapon slightly further forward than that to starboard) in a bay just above and behind the engine. The breeches partly projected into the cockpit, above the instrument panel. The Ho-103 was a light weapon for its caliber (around 23 kg/51 lb) and fired a light shell, but this was compensated for by its rapid rate of fire. The ammunition capacity was limited, having only around 250 rounds for each weapon. A self-sealing fuel tank with a capacity of 165 L (44 US gal) was located behind the pilot's seat. The windshield was armored and there was a 13 mm (.51 in) armor plate behind the pilot. The radiator and oil cooler for the liquid-cooled engine were in a ventral location below the fuselage and wing trailing edge, covered by a rectangular section fairing with a large, adjustable exit flap.
The evenly-tapered wings had an aspect ratio of 7.2 with a gross area of 20 m² (215.28 ft²) and featured three spars; a Warren truss main spar and two auxiliary spars. The rear spar carried the split flaps and long, narrow-chord ailerons, while the front spar incorporated the undercarriage pivot points. The undercarriage track was relatively wide at 4 m (13 ft 1.5 in). Each wing had a partially self-sealing 190 L (50 US gal) fuel tank behind the main spar, just outboard of the fuselage. A single weapon (initially a 7.7 mm/0.303 in Type 89 machine gun) was able to be carried in a weapons bay located behind the main spar.
The first prototype of the San-shiki-Sentohki ichi gata ("Type 3 Fighter, Model 1", the official IJAAF designation) first flew in December 1941 at Kagamigahara Airfield. Although test pilots were enthusiastic about its self-sealing fuel tanks, upgraded armament, and good dive performance, the wing loading of 146.3 kg/m² (30 lb/ft²) at an all-up weight of 2,950 kg (6,500 lb) was viewed with scepticism by many of the senior officers of the Koku Hombu, who still believed in the light, highly manoeuvrable, lightly armed fighter epitomised by the then new Ki-43-I-Hei which had a wing loading of 92.6 kg/m² (19 lb/ft²) (and even that was considered borderline compared to the earlier Ki-27).
To address these concerns, Kawasaki staged a fly-off between two Ki-61 prototypes and the Ki-43-I, a pre-production Ki-44-I, a LaGG-3 (flown to Manchuria by a defector), a Bf 109E-3, and a captured P-40E Warhawk. The Ki-61 proved the fastest of all the aircraft and was inferior only to the Ki-43 in manoeuvrability.
The Ki-61 was the last of the fighters powered by the DB-601 or its foreign derivatives, and it was soon overshadowed by fighters with more powerful engines. By the time it first flew in December 1941, one year after the Macchi C.202's first flight and three years after the first Bf 109E, the engine was already underpowered compared to the new 1,120 kW (1,500 hp) inline or 1,491 kW (2,000 hp) radial engines being developed (and already nearing the mass-production stage) to power the next generation of combat aircraft such as the Republic P-47. Moreover, the inline Ha-40 engine proved to be an unreliable powerplant.
The DB-601 engine required precise and sophisticated manufacturing; the Ha-40 was lighter by roughly 30 kg (70 lb) and required even higher manufacturing standards. Reaching these standards proved difficult for Japanese manufacturers, an issue further complicated by the variable quality of materials, fuel, and the lubricants needed to run a sensitive, high-performance engine. The Japanese equivalent of the more powerful DB-605 engine was the Ha-140, which was fitted onto the Type 3 to produce the Ki-61-II high-altitude interceptor.
Compared to the Ki-61-I, the Ki-61-II had 10% greater wing area, used more armour and was powered by the Kawasaki Ha-140 engine generating 1,120 kW (1,500 hp). After overcoming initial fuselage and wing stability problems, the new interceptor reverted to the original wing and was put into service as the Ki-61-II-KAI. However, the Ha-140 engine had severe reliability problems which were never fully resolved, and around half of the first batch of engines delivered were returned to the factory to be re-built. A US bombing raid on 19 January 1945 destroyed the engine factory in Akashi, Hyogo, and 275 Ki-61-II-KAI airframes without engines were converted to use the Mitsubishi Ha-112-II radial engine, resulting in the Ki-100. While the Ha-112 solved the problems encountered with the Ha-140, the new engine still had a major weakness: a lack of power at altitude, which diminished its ability to intercept high-flying B-29s relative to the Ki-61-II.
During testing, the Hien proved capable, but several shortcomings were subsequently revealed in operational service, namely the armor protection that was insufficient against larger guns and a sub-standard engine that eventually led to a new engine being considered.