During 1986, General Motors acquired Group Lotus, the UK based engineering consulting and performance car manufacturing firm. The Corvette division approached Lotus with the idea of developing the world's fastest production car, to be based on the C4 generation Corvette. With input from GM, Lotus designed a new engine to fit in place of the L98 V8 that was powering the standard C4. The result was what GM dubbed the LT5, an aluminum-block V-8 with the same bore centers as the L98, but with four overhead camshafts, 32 valves. Lotus also designed a unique air management system for the engine to provide a wider power band by shutting off 8 of the 16 intake runners and fuel injectors when the engine was at part-throttle, while still giving the ZR-1 375 hp (280 kW) when at wide open throttle.

In addition to the engine, Lotus helped GM design the ZR-1's upgraded braking and steering systems, and helped them pick the settings for the standard "FX3" adjustable active ride control that Chevrolet was fitting to the car, helping to ensure that the vehicle was more than just a modern-day muscle car with a big engine and no real capability on the track.

GM found that the engine required special assembly, and that neither the Corvette plant in Bowling Green, Kentucky nor any of their normal production facilities could handle the workload, so Mercury Marine corporation of Stillwater, Oklahoma was contracted to assemble the engines and ship them to the Corvette factory in Bowling Green where the ZR-1s were being assembled.

The vehicle went on sale in 1990 and was available only as a coupe. It was distinguishable from other Corvette coupes by its wider tail section, 11" wide rear wheels and its new convex rear fascia with four square shaped taillights and a CHMSL (center high mounted stop lamp) attached to the top of the hatch glass instead of between the taillights.

The ZR-1 displayed stunning ability both in terms of acceleration and handling capabilities, but carried with it an astonishingly high price. MSRP for the ZR-1 in 1990 was $58,995, almost twice the cost of a non-ZR-1, and had ballooned to $66,278 by 1995; it has been rumored that some dealers successfully marked units as high as $100,000. Even at base MSRP, this meant that the ZR-1 was competing in the same price bracket as cars like the Porsche 964, making it a hard sell for GM dealers.

In 1991, the ZR-1 and base model received updates to body work, interior, and wheels. The rear convex fascia that set the 1990 ZR-1 apart from the base model found its way to all models, making the high-priced ZR-1 even less distinguishable. Further changes were made in 1992, including extra ZR-1 badges on the fenders and making traction control a standard feature, and in 1993, when Lotus designed modifications were made to the cylinder heads, exhaust system and valvetrain of the LT5, bringing horsepower up to 405. In addition, a new exhaust gas recirculation system improved emissions control. The model remained nearly unchanged into the 1995 model year, after which the ZR-1 was discontinued as the result of waning interest and the fact that Chevrolet had never been able to sell them easily. A total of 6,939 ZR-1s were manufactured over the six year period.

Not until the debut of the C5 platform Z06 would Chevrolet have another production Corvette capable of matching the ZR-1's performance.