The Carl Gustaf was developed by Hugo Abramson and Harald Jentzen at the Kungliga Arméförvaltningens Tygavdelning (Royal Swedish Arms Administration) and produced at Carl Gustaf Stads Gevärsfaktori from where it derives its name. The weapon was first introduced into Swedish service in 1948 as the 8,4 cm Granatgevär m/48 (Grg m/48), filling the same anti-tank role as the U.S. Army's Bazooka, British PIAT and German Panzerschreck. Unlike these weapons, however, the Carl Gustaf used a rifled barrel for spin-stabilizing its rounds, as opposed to fins used by the other systems.
The use of the recoilless firing system allowed the Carl Gustaf to use ammunition containing considerably more propellant, firing its rounds at 290 m/s, as opposed to about 105 m/s for the Panzerschreck and Bazooka and about 75 m/s for the PIAT. The result was superior accuracy at longer ranges. The Carl Gustaf can be used to attack larger stationary targets at up to 700 m, but the relatively low speed of the projectile restricts attacks on moving targets to a range of 400 m or less.
The Carl Gustaf was soon sold around the world and became one of the primary squad-level anti-tank weapons for many West European armies. An improved version (M2) was introduced in 1964 and quickly replaced the original version. The current M3 version was introduced in 1991, using a thin steel liner containing the rifling, strengthened by a carbon fiber outer sleeve. External steel parts were replaced with aluminium alloys or plastics, reducing the empty weapon weight considerably—from 16.35 kg to 10 kg.
In recent years, the weapon has found new life in a variety of roles. The British Special Air Service, United States Army Special Forces and United States Army Rangers use M3s in bunker-busting and anti-vehicle roles, while the German Bundeswehr maintains a small number of M2s for battlefield illumination. Many armies continue to use it as a viable anti-armor weapon, especially against 1950s- and '60s-era tanks and other armored vehicles still in use worldwide.
In a well-documented incident during the Falklands War, a Royal Marine attacked an Argentinian corvette (ARA Guerrico) using a Carl Gustaf.
The Carl Gustaf was used against Taliban defensive fortifications by soldiers of Princess Patricia's Canadian Light Infantry in operations in Afghanistan. They developed a new system for firing at night in which a spotter with a night-scope fires tracer ammunition to mark the target for the Carl Gustaf gunner.
Carl Gustaf launchers were used by Free Libyan Army during the Libyan Civil War in 2011; the weapons being used were either captured or provided by defecting members of the Libyan Army.
In November 2011, the U.S. Army began ordering the M3 MAAWS for regular units deployed in Afghanistan. Soldiers were being engaged with RPGs at 900 meters, while their light weapons had effective ranges of 500–600 meters. The Carl Gustaf allows airburst capability of troops in defilade out to 1,250 meters, and high explosive use out to 1,300 meters. While the weapon provides enhanced effectiveness, its 9.5 kg weight burdens troops. On 28 March 2013, USSOCOM announced a call for sources to develop a kit to lighten the M3 MAAWS by 1.3–2.2 kg, plus a 7.5 cm reduction in overall length, without affecting the weapon's center of gravity or ruggedness, including air delivery and salt water submersion. A kit with production configuration is to be delivered within 16 months. Saab has developed a weight-reduced version prior to the SOCOM release weighing approximately 11 kg and is 5 cm shorter. Live fire tests have demonstrated no decrease in performance, no increase in recoil, and nearly equivalent barrel life. It was to be ready for government testing in 2014. Saab has also developed a new high explosive round that has a direct fire range of 1,500 meters when using a fire control system.
At AUSA 2014, Saab Dynamics displayed its new Carl Gustaf M4 variant. Compared to the M3 MAAWS, the M4 is 3.4 kg (7.5 lb) lighter weighing 6.6 kg (15 lb) and shorter with a 950 mm (37 in) overall length. The shorter length was in response to the need to wield the weapon in urban terrain, and weight savings were achieved through using lighter components whenever possible including a carbon fiber tube with titanium liner, as well as a new venturi design. Other new features include a red-dot sight, a travel safety catch to allow the M4 to be carried while loaded, an adjustable shoulder rest and forward grip for improved ergonomics, a shot counter to keep track of how many rounds have been fired to manage the weapon's 1,000-round barrel life, picatinny rails for grips and sight mounts, and a remote round management function so intelligent sights can "talk" to programmable rounds. Sources claim the M4 can meet the needs of USSOCOM for a shorter and lighter recoilless rifle and note that they are considering acquiring it under the designation of M3A1. The Defense Department has agreed to evaluate the shorter and lighter M4 version over the next two years.