The XK120 was launched in roadster form at the 1948 London Motor Show as a testbed and show car for the new Jaguar XK engine. The display model was the first prototype, chassis number 670001. It looked almost identical to the production cars except that the straight outer pillars of its windscreen would be curved on the production version. The roadster caused a sensation, which persuaded Jaguar founder and design boss William Lyons to put it into production. In 1949 the first customer car, chassis number 670003, was delivered to Clark Gable.

The “120” in its name referred to its 120 mph (193 km/h) top speed (faster with the windscreen removed), which made the XK120 the world’s fastest standard production car at the time of its launch. It was available in two open versions, first as the roadster (designated OTS, for open two-seater, in America), then also as a drophead coupé (DHC) from 1953; and also as a closed, or “fixed-head” coupé (FHC) from 1951. The DHC was a more deluxe open model, with wind-up windows, and wood-veneer dashboard and interior door caps, as on the FHC. A smaller-engined version intended for the UK market was cancelled prior to production.

In 1950 and 1951, at a banked oval track in France, XK120 roadsters averaged over 100 mph for 24 hours and over 130 mph for an hour, and in 1952 a fixed-head coupé took numerous world records for speed and distance when it averaged 100 mph for a week. Roadsters were also successful in racing and rallying.