Development of the rifle started in 1963 as a joint project between SIG and Beretta. The latter had already cooperated with SIG on the production of the SG 510-4 rifle for Chile. Initial prototypes of the 5.56 mm rifle used the delayed-blowback operating system of the SIG SG 510. However, this operating system proved to be problematic with the relatively "weak" 5.56×45mm NATO intermediate cartridge, and the designers were forced to use a gas-operated, roller-locked system. In 1968, Beretta ceased development with SIG, and went to work on their own 5.56 mm rifle design resulting in the outwardly similar AR70. Due to a lack of sales, SIG abandoned the SG 530 in the 1970s in favor of developing the SG 540 series.