Overall, the new AR-18 rifle is much more conventional than previous ArmaLite designs, although it uses the relatively new stamped steel construction from its predecessor, the AR-16. Despite being pioneered by the Germans during WW2 in weapons such as the MP44, and later adopted for the Soviet AKM, the use of stamped and welded sheet metal components was still uncommon in the manufacture of military rifles in the West in the early 1960s, which had, until then, largely retained the use of traditional machined forgings. Compared to the smooth lines of the AR-15, the AR-18 faced criticism over its stamped and welded construction, which had demonstrably greater tolerances in parts fit. However, the rifle proved to be both reliable and very accurate at all ranges up to 460 metres (500 yards). Its simple construction promised significantly reduced production costs, and allowed it to be licence-produced locally on less advanced machinery, potentially reducing dependence on foreign manufacturers. Moreover, the gas piston operation of the AR-18 proved much more resistant to carbon fouling than the direct gas impingement system of the earlier AR-10 and AR-15 rifles, as it does not vent gas and carbon particles directly into the receiver.
The AR-18's action is powered by a short-stroke gas piston above the barrel. The gas piston is of 3-piece design to facilitate disassembly, with a hollow forward section with 4 radial gas vent holes fitting around a stainless steel gas block projecting rearwards from the foresight housing. The gas is vented from the barrel and travelled via a vent through the foresight housing into the hollow front section of the piston, which causes it to move rearwards a short distance. The rear end of the piston emerges through the barrel extension to contact the forward face of the bolt carrier, causing it in turn to move rearwards. The bolt itself is of similar configuration to the AR-15 with 7 radial locking lugs engaging corresponding recesses in the barrel extension, and the extractor in place of the 8th lug. The bolt is moved into and out of the locked position via a cam pin that engaged a helical slot in the bolt carrier, which rides on two metal guide rods (each with its own return spring) instead of contacting the receiver walls, providing additional clearance for foreign matter entering the receiver. Unlike the AR-15, the cocking handle fits directly into a recess in the bolt carrier and reciprocates with it during firing, allowing the firer to force the breech closed or open if necessary. The cocking handle slot has a spring-loaded cover that can be closed by the user to prevent debris entering the receiver, and it will open automatically as the bolt carrier moves rearwards after the first shot. The recoil springs are housed within the receiver, differing from the AR-15 which houses its more elaborate buffer mechanism in the buttstock. The AR-18's compact design enables the use of a side-folding stock with a hinging mechanism (which proved to be less than adequately rigid).
The sights are of similar design and sight picture to those of the AR-15 - a 2-position flip aperture rear sight and post foresight - but the rear sight is made of stampings. A notable change is the use of a more conventional lower sight line closer to the axis of the bore, in contrast to the elevated sights of the AR-15. A dovetail is spot welded to the receiver in front of the rear sight for a proprietary ArmaLite quick-detachable scope mount.
Overall, the design is simple and effective with some clever touches; for example the bolt guide rod assembly guides the bolt in the receiver, retains the recoil springs and the rear end of the top handguard, as well as serving as the latch holding the upper and lower receivers together in the closed position. Disassembly is somewhat similar to the AR-15, with the working parts accessed by the rifle pivoting open on a cross-pin immediately forward of the magazine well.