In 1932, the Imperial Japanese Navy had a requirement, 7-Shi, for a new torpedobomber to replace the Mitsubishi B2M. The air arsenal at Yokosuka prepared its own design to meet this requirement, competing against designs by Mitsubishi and Nakajima.
The resulting aircraft was a three-seat single-engine biplane, with a fuselage of steel tube construction and two-bay wooden wings that could fold rearwards for storage aboard aircraft carriers. It was powered by a single Hiro Type 91W engine rated at 450 kW (600 hp).
Testing proved that the aircraft had poor stability and control, and that the engine was unreliable. The competing Mitsubishi and Nakajima aircraft were even less successful however, and after modifications made by Tokuichiro Gomei of Aichi Kokuki, the aircraft was accepted by the Navy in August 1933 as the Type 92 Carrier Attack Bomber, with a short designation of B3Y1, with production by Aichi, Watanabe and the Hiro Naval Arsenal, 129 being produced by the time that production finished in 1936.
The B3Y1 continued to be prone to engine problems, which frequently caused the type to be grounded. It served operationally in the early part of the Second Sino-Japanese War, gaining a good reputation for accurate level bombing against small targets. The B3Y was gradually phased out of operational service, being replaced by Aichi's D1Adive bomber and Yokosuka's B4Y torpedo bomber.