Carroll Shelby was a man of many talents and his name would become synonymous with performance. He began working with Ford in 1964 to develop a performance version of the Mustang to compete in SCCA road racing, resulting in the 1964 Shelby GT350. It was powered by a modified version of the standard K-code engine, with horsepower increasing from 271 hp to 306 hp. The 1965 version was not built for comfort, but Shelby rectified this with the 1966 model year GT350, allowing customers to select an optional automatic transmission and a more comfortable interior.

The Shelby Mustang underwent its first redesign in 1967, during which time they added the GT 500 to the lineup, giving buyers a new option featuring the larger 428 CID engine that was capable of zero-to-sixty mph in 6.5 seconds. The interiors featured an integrated roll-cage, a console with padded armrests, and Stewart-Warner oil pressure and amp gauges mounted below the radio.

In 1968, a convertible option was added to the Shelby line-up, available with either a 302- or 428-cubic-inch eight-cylinder engine. The High Performance 289 cubic-inch V8 was no longer offered on the Ford or Shelby versions of the Mustang. The 302 was standard on the GT350, equipped with an aluminum intake manifold and Holley 600 CFM carburetor capable of producing 250 horsepower. 1968 also marked the year that Ford took over production of the Shelby vehicles with operations moving to Livonia, Michigan. Shelby Automotive had outgrown its California plant adjacent to Los Angeles International Airport, so production was relocated to Michigan at the start of the 1968 model year. The Mustangs were built at Ford's Metuchen, New Jersey, plant, and then shipped by rail to A.O. Smith Corporation, a long-time industry supplier, in Michigan for the Shelby touches, final assembly, and delivery preparation.

The styling modifications for 1968 were minor, with the front restyled with a more aggressive appearance. The headlights switched back to the single seven-inch unit configuration with Lucas fog lamps positioned inside the grill. The hood was once again a fiberglass unit with repositioned scoops and air-extraction louvers. The back was revamped too, now using 1965 Thunderbird sequential taillights, further distinguishing it from the standard Mustang.

The 428 engine increased in horsepower by 5 over the prior year, due to a single four-barrel aluminum intake manifold in place of the prior dual-carburetor setup. To honor this achievement, the GT500 equipped with the 428CJ now became known as the GT500KR, or King of the Road. These were the fastest Shelby production vehicles to date and offered superb handling, braking, and most of all, acceleration. Many improvements were made to the existing 428 block, including new cylinder heads with rectangular intake and exhaust ports (even larger than those used on the 427 Le Mans and factory drag-race engines). Similar to the 427 racing engines, the block was cast of higher-grade nodular iron, and the pistons were made of alloy and the connection rods from high strength steel. Two different cam options were available with one tuned for street use and the other intended for drag racing. Ford advertised 335 hp, though estimates put the number closer to 400 hp.