After going through a difficult period in the 1970s due to the various fuel crises, international motorsport returned with a vengeance in the 1980s. A variety of technical innovations led to the development of some of the most outrageous track and rally racers. For the 1982 season, the sport's governing body, the FIA, regrouped the various classes into Group A for high production derived racers to Group C for prototypes. The World Rally Championship would be held for Group B cars, which replaced the Group 4 rules of the previous seasons.

These rule changes inspired Lancia to return to the sport, the sport they had previously dominated with their Fulvia and Stratos. There was a homologation requirement of 200 examples and there were four displacement divisions with their own minimum weight ranging from 820 kg for the 2000 cc group to 1100 kg for the 4000 cc group. For forced induction engines there was a 1.4 equivalency factor. Lancia took the rules very literally and designed a new rally car from the ground up. To meet the homologation requirements 200 slightly downtuned versions would be available to the public.

Following lessons learned with the Stratos rally car and the Beta road racer, a mid-engined layout was chosen for the '037'. The two litre engine was derived from the successful Fiat Abarth 131 and supercharged for the occasion. Power was transferred to the rear wheels only as the Lancia engineers felt the Audi pioneered four wheel drive system to be too complex. Ease of access was one of the key ingredients of the design; the gearbox could be changed in twelve minutes. The nimble Lancia's handling was unmatched, but the lack of four wheel drive and the lack of power from the supercharged engined were big handicaps. Nevertheless many wins were scored between 1982 and 1985 and Lancia clinched the Constructor's crown in 1983.

While the 037s gave the Audis and later Peugeots a good run for their money, the Lancia and Abarth people were busy on something very special. For marketing purposes the new rally car somewhat followed the lines of the recently launched, Giugiaro designed Delta. That's about where the similarities stopped. This time the engineers really started with a clean sheet as every part of the 'Delta S4' was purpose built. Again the emphasis was on ease of access to allow for quick repairs, which were frequently required. Some of the accessibility was sacrificed when the designers opted for a four wheel drive system.

The all aluminum 1.8 litre four cylinder engine was the most advanced of its era and featured a supercharger and a turbocharger. This provided the engine with plenty of low end torque as well as nearly 500 bhp at 8400 rpm. Compared to the contemporary F1 cars these figures might not sound very impressive, but these engines could be cold-started without external assistance in arctic conditions and survive the continuous abuse on the roughest terrain. The four cylinder unit was installed longitudinally behind the passenger compartment in a steel spaceframe chassis. The gearbox and transfer case for the four wheel drive system were mounted in front of the engine, so all the weight was concentrated between the two axles.

Lancia struggled to get to terms with the four wheel drive system, which caused the introduction of the Delta S4 to be postponed to the 1985 RAC Rally; the last of the season. The wait proved well worth it as Finnish driver Henri Toivonen drove the S4 to an impressive debut victory. He repeated that feat in the 1986 season opening Monte Carlo Rally, despite severely damaging his car between two special stages. The Lancia mechanics managed to repair the damaged chassis by simply cutting out the damaged tubes and replacing them by new ones and all of this in less than 30 minutes. At the next round in Sweden, the S4 dictated the pace again, but this time the reliability let Toivonen down. Marku Alen's car did survive the arctic rally and he finished second.

After Sweden it all went terribly wrong for Group B in general and Lancia in particular. At the first day of the next round in Portugal, local driver Joaquim Santos went off the road in a Ford RS200 killing three spectators and injuring several dozen more. The rally was obviously cancelled and the FIA promptly killed off the Group S class proposed for 1987. This was intended for an even more specialized machine of which just ten examples were required for homologation. At the Tour de Corse things got even worse when Toivonen had a fatal crash. This was the final blow for Group B as Audi retired immediately after and the FIA announced the World Championship would be run for more civilized Group A cars in 1987.

Even though the Delta S4 was still very fresh, the engineers at Lancia saw an opportunity to incorporate even more know-how in for the proposed Group S car and work commenced on that early in 1986. Surprisingly the project was not abandoned when Group S was cancelled. Later in the year the wraps were taken off the Experimental Composite Vehicle, or ECV at the Bologna Motorshow. It looked similar to the S4, but featured a highly advanced carbon composite monocoque chassis. It was powered by twin turbocharged version of the four cylinder engine, which was capable of 600 bhp, although Group S regulations would have restricted it to 300 bhp. Sadly the car was never raced.

In compliance with the rule changes, Lancia developed a rally car much more closely related to the Delta production car. The engine was mounted transversely in front of the driver and although turbocharged, produced a more civilized 265 bhp. Both the road and rally versions of this Delta HF Integrale were a big hit and Lancia dominated the World Rally Championship for years to come.