The MP60 was designed in the spring of 1960 after the failure of Erma's previous submachine guns, the MP58 and MP59, to achieve military adoption by the Bundeswehr. The project was directed by Josef Eder and the aim was to make an affordable and easy-to-use submachine gun. An initial production line of twenty hand-made MP60s was produced for mock trials at Erma, and once it had been sufficiently tested it was submitted in an official capacity to military trials, for which a further twenty models were built. The MP60 was tested by the Bundeswehr from September to October 1960 but rejected for improvements.
Erma developed a slightly improved model, the MP61, in 1961, which was originally intended to be submitted to the 1960 trials but could not be produced at the time. The MP61 incorporated design changes that reflected the feedback that the MP60 had received. However, the Bundeswehr were not interested in the MP61 and it was not submitted to further trials. Erma produced a final improved model in the form of the MP64 and planned to submit it for military trials but by the time the prototypes were finished, the Bundeswehr decided on adopting the Uzi.
The the mid-1960s, Erma attempted to sell the MP61 on the international market under the name MP65, however it failed to receive any sales.
The MP60 was a blowback-operated submachine gun designed to be produced at a low budget. The entire body was constructed from a single sheet of stamped steel. Two carrying springs with guide rods were fitted on either side of the bolt. It fed through 36-round Carl Gustav magazines.