The AT4 is a development of the 74-mm Pansarskott m/68 (Miniman), adopted by the Swedish Army in the late 1960s. Like the m/68, the AT4 was designed by Försvarets Fabriksverk (FFV) and manufactured at their facility at Zakrisdal, Karlstad, Sweden. FFV began research in a replacement for the m/68 in 1976, deliberately designing an individual anti-armor weapon that would not be able to defeat the heavy armour protection of MBTs (main battle tanks) in frontal engagements, believing that to be counterproductive. The AT4 was designed as a weapon to engage medium to light armoured vehicles from any direction, MBTs from the sides or rear, and as an assault weapon against buildings and fortifications. FFV also had the design goal of a weapon that was simple to use, rugged, and far more accurate than previous individual antiarmor weapons against moving targets. Another key requirement was that the AT4 not only be able to penetrate armour, but also have a devastating beyond-armour effect after penetration. FFV and the Swedish Army began the first evaluation firings of the prototype AT4s in the spring of 1981 with 100 tested by early 1982.
Even before the AT4 had been adopted by Sweden, it was entered into a US Army competition for a new anti-tank weapon mandated by Congress in 1982 when the FGR-17 Viper failed as a replacement for the M72 LAW. Six weapons were tested in 1983 by the US Army: the British LAW 80, the German Armbrust, the French APILAS, the Norwegian M72E4 (an upgraded M72 LAW), the US Viper (for baseline comparison purposes) and the Swedish AT4. The US Army reported to Congress in November 1983 that the FFV AT4 came the closest to meeting all the major requirements established to replace the M72 LAW, with the Armbrust coming in second.
Though very impressed with the simplicity and durability of the tested version of the AT4, the US Army saw some room for improvement, specifically the addition of rear and front bumpers on the launch tube and changes to the sights and slings. After these changes, the AT4 was adopted by the US Army as the Lightweight Multipurpose Weapon M136. The Swedish Army also recognized these improvements and subsequently adopted the Americanized version of the AT4 as the Pansarskott m/86 (Pskott m/86), with the addition of a forward folding hand grip to help steady the AT4 when being aimed and fired. The forward folding grip is the only difference between the AT4 adopted by Sweden and the US Army version.
Due to the urban combat conditions that US military forces have been facing regularly in the last several years, the US Army Close Combat Systems manager in charge of purchases of the AT4 suspended orders for the standard version of the AT4 and US military forces are now only ordering the AT4 CS version.