The project first started at the end of the 1930s as the L 10 by ASJA, but after the merger with SAAB in 1937 it was renamed Saab 17. The wings were reinforced to make it possible to use it as a dive bomber. Since there was a shortage of engines the planes were flown to the destination where the engine was removed and reused for the next delivery. The plane was also made in three versions with different engines. The B 17A used a Swedish built Pratt & Whitney Twin Wasp, the B 17B a British Bristol Mercury XXIV licence-built in Poland, and the B 17C an Italian Piaggio P.XI. The aircraft could be fitted with wheels, skis or floats. A unique feature of the Saab 17 was its use of the extended landing gear assembly, with its large covers, as dive brakes.
The first test flight was on 18 May 1940 and first deliveries to the Swedish Air Force (Flygvapnet) were in 1942. However, the development of jets meant it had a short service history. When the planes ended service in 1947-1950 46 of them were sold to Ethiopia where they were in service until 1968. Two B 17As were sold to Finland in 1959 and 1960, serving as target tugs in the Finnish Air Force. However, both were soon damaged and removed from service.
Five SAAB 17s are known to be in existence today. The Swedish Air Force Museum in Linköping have two aircraft in their collections, one S 17BL and one B 17A, the latter is kept in airworthy condition. Another B 17A is on display at the Danish Museum of Science and Technology in Helsingør. Two former Ethiopian B 17A were recovered in the 1990s and purchased by a South African collector. These are last known to have relocated to Lithuania but their current status is not clear.