In 1934, a specification for a modern twin-engined aircraft capable of operating both as a high speed airliner for the German airline Lufthansa and as a medium bomber for the still-secret Luftwaffe was issued to both Junkers and Heinkel. Five prototypes were ordered from each company; the Junkers Ju 86 and Heinkel He 111. Junkers design was a low-winged twin engined monoplane, of all-metal Stressed skin construction. Unlike most of Junkers previous designs, it discarded their typical corrugated skinning in favour of smooth metal skinning which helped to reduce drag. The craft was fitted with a narrow track retractable tailwheel undercarriage and twin fins and rudders. It was intended to be powered by the Junkers Jumo 205 diesel engines, which although heavy, gave superior fuel consumption to conventional petrol engines.
The first prototype Ju 86, the Ju 86ab1, fitted with Siemens SAM 22 radial engines as airworthy Jumo 205s were unavailable, flew on 4 November 1934, in bomber configuration, with the second prototype, also a bomber, flying in January 1935. The third Ju 86, and the first civil prototype, flew on 4 April 1935. Production of pre-series military and civil aircraft started in late 1935, with full production of the Ju 86A-1 bomber commencing in April 1936. Production quickly switched to the improved Ju 86 D with a modified tail cone to impove stability. Early use of the Jumo powered Ju 86 bomber over Spain showed that it was inferior to the He 111, with the diesel engines being unsuitable for rough treatment during combat, and production plans were cut back. One Ju 86 had already been converted to use radial engines as a testbed for possible export versions, and this showed much improved reliability, and production was switched to a version powered by the BMW 132 engine, the Ju 86E, production continuing until 1938.
The bomber was field tested in the Spanish Civil War, where it proved inferior to the Heinkel He 111. Four Ju 86D-1 arrived in Spain in early February 1937, but after a few sorties one of them (coded 26-1) was shot down on 23 February by Republican fighters with the loss of three crewmen killed and one captured. A replacement aircraft was sent from Germany, but in the summer of 1937 another D-1 was lost in an accident, and the three remaining planes were sold to the Nationalist air forces.