The SdKfz 250 was developed from the earlier SdKfz 10 as an half-track armored personnel carrier capable of transporting a Halbgruppe (half-platoon) of infantry. Unlike the similar SdKfz 251, the SdKfz 250 was meant primarily for reconnaissance units rather than general use as a personnel carrier. The SdKfz 250 was based on a shortened Demag D7 tractor chassis, with the forward wheel and torsion bar removed. Like many other German tracked vehicles, it featured overlapping roadwheels and and was capable of using either the wheels or tracks for steeing. The armored superstructure was prominently sloped (less so in later variants) and open-topped and carried a variety of armament, the default being a pair of MG 34 machine guns but there were versions with more powerful armament up to a 7.5cm KwK 37 gun which were used for fire support for the more lightly armed variants. The SdKfz 250 was also used for a myriad of other roles including command vehicles, observation vehicles, ammunition carriers, and artillery spotters. The basic personnel carrier variants were issued primarily to Aufklärungs detachments of Panzer and Panzergrenadier divisions with up a 55 vehicles per division under 1944 requirements.

Production of the Leichter Schützenpanzerwagen (SdKfz 250) began in June 1941 from a design that had its origins in 1939. The original SdKfz 250/1 troop carrier was retroactively referred to as LeSPW Alte ('old') following a redesign of its superstructure into a more simplified form for ease of mass production; this variant was later referred to as the LeSPW Neu and could be distinguished by the flatter sides. The SdKfz 250/2 was a cable layer, command vehicle variants included the SdKfz 250/3 and 250/5, ammunition carriers included the SdKfz 250/6 and SdKfz 252, and artillery observation vehicles included the SdKfz 250/12 and SdKfz 253. Various reconnaissance and fire support versions were built with heavier armament. This included the SdKfz 250/8 with a 7.5cm KwK 37 gun, SdKfz 250/9 with a 2cm KwK 38 cannon on the turret of a SdKfz 222 armored car, SdKfz 250/10 with a 3.7cm PaK 35/36 gun, and SdKfz 250/11 with a 2.8cm sPzB 41 anti-tank rifle.