Texan racing driver Carroll Shelby and his team had been campaigning Ford's Mustang with considerable success in North America, winning the SCCA's B-Production title three years running in the mid-1960s. Shelby was known, trusted, and respected by Ford, thanks to his efforts in engineering the Cobra projects. Capitalizing on this success, Shelby began modifying Mustangs, which were officially sanctioned and sold through select Ford dealerships. Called the GT350, they arrived in 1965 with power from a modified version of Ford's 289 cubic-inch (4.7-liter) small-block V8 engine, with an aluminum intake manifold and Shelby's own headers, offering just over 300 horsepower, with options of a 340 to 360 horsepower unit in competition or 400 bhp supercharged. The stock transmission on early Shelby Mustangs was a four-speed Borg-Warner manual gearbox, though a heavy-duty, three-speed automatic soon became available as optional equipment.

To handle the increase in power, the running gear was improved with a stronger Ford Galaxie rear axle, Koni adjustable shock absorbers, aluminum-alloy wheels, and Kelsey-Hayes front disc brakes. The early cars were delivered devoid of rear seats, thereby qualifying the GT350 as a two-seat sports car. There were few distinguishable exterior features that set Shelby's GT350 from the standard Mustang, apart from a pair of broad 'racing' stripes down the body center-line with the GT350 logo. There was a fiberglass hood with functional scoops. All external Mustang emblems were removed, and Shelby added his own equine badge on the left side of the grille.