Once they returned home, four engineers, Ion Grosu, Ion Cosereanu, Gheorghe Zotta and Gheorghe Vallner decided in 1937 to start working on what was to become the best Romanian-made fighter of WW2 : the IAR-80. Ion Grosu was the team's leader and one of the strongest supporters of the low-wing design, which he was convinced it was the way to go. The team's first step was to take the finest fighter in service with the ARR ( the Polish PZL P-24E ) and study it, to see which of its features could be incorporated in the new project. The plane begun to take shape on the drawing board as a cantilever low-wing monoplane in October 1937, after signing a development contract with the Ministry of the Air and Navy. Since the international situation was becoming extremely hazardous, it was decided to speed up the design and production process by using as many components and equipment from previous projects as possible, in order to get as many IAR-80's ready for battle as soon as possible.

For this reason, the rear fuselage and the tail were designed from the rear fuselage of the PZL - P24E fighter, which was a semi-monocoque, but were fitted with the new IAR-TU hydraulic damper. Generally, the fuselage was circular in a section, becoming more of an egg-shape from behind the cockpit to the tail. The engine mounting and the cowling design were also taken from the PZL P24E, while the forward fuselage and the connecting structure ( a welded steel tube covered with duralumin sheeting ) between the forward and rear fuselage were brand new, having been designed from scratch.

An advanced Messier type landing gear with a hydraulic retracting installation were fitted to the prototype ( it was the very first Romanian aircraft with a retractable landing gear ); the main gear was pretty wide ( which made for easy take-off's and landings ), retracting inwards, whilst the tail gear was a simple, non-retractable "skid".

Since the IAR lacked wind tunnels to perform airflow studies, the designers chose for the wings to adapt the wing of the SM-79B bomber on a 1:2 scale, but in an all-metal configuration, using PZL techniques in the manufacturing process. Therefore, the result was a rectangular wing, mounted just behind the engine, with small flaps and a rounded wingtip ( much like the wing of the famous Spitfire ).

The prototype was supposed to be fitted with a 1200 HP Junkers Jumo 211Da engine, but since it wasn't delivered on time the decision was made to use the Romanian-made IAR-K14 II C32 engine which generated some 950 HP. This engine, based on the French Gnome Rhone K14 Mistral Major engine, was a conventional 14 cylinders, double-row, air-cooled, radial powerplant and had successfully passed several tests in the autumn of 1936, generating a lot of hopes. It was almost 200 kg lighter than the Junkers Jumo, but, unfortunately, in 1938 it was discovered that because of several design flaws of the French model, the engine had a exaggerated oil consumption, which reduced its power output to 857 HP. The man in charge with IAR's engine factory, engineer Carp, knew this from early 1937, but for some strange reason, he didn't informed his superiors but tried to fix the problems all by himself. In the end, the prototype was fitted with the K14 II C32, as the German Junkers Jumo engines failed to arrive even in 1939! It was armed with two ( or four, it's not very clear ) Belgian FN 7.92 mm ( a Browning license ) machine guns, placed in the inner portion of the wings.

The first flight took place on April the 12th, 1939, the aircraft being presented to the public on May the 10th 1939, during a military parade organized on king Carol the II-nd's birthday. The results of the test flights showed that the plane was more than a match for any other fighter of the day. A top speed of 510 km/h ( truly excellent for that time ) at 4000 meters was achieved, and the aircraft was reported to have very good maneuverability. Test pilots declared the IAR-80 was a delight to fly and very responsive to controls.