After improved German Panzer IVs with the high-velocity 75 mm (2.95 in) gun were encountered in combat in 1942, a project to design an entirely new Soviet tank was begun, with the goals of increasing armour protection while adding modern features like a torsion-bar suspension and a three-man turret. The new tank, the T-43, was intended to be a universal model to replace both the T-34 and the KV-1 heavy tank. However, the T-43 prototype's armour, though heavier, was not capable against German 88 mm guns, while its mobility was found to be inferior to the T-34. Finally, although the T-43 shared over 70% of its components with the T-34, manufacturing it would still have required a significant slow-down in production. Consequently, the T-43 was cancelled.

With the T-43 canceled, the Soviet command made the decision to retool the factories to produce an improved version of the T-34.

Production of the T-34-85 began in January 1944 at Factory No. 112, first using the D-5T 85 mm gun. Parallel to the production of the T-34-85 with the D-5T gun, production of the T-34-85 using the S-53 gun (later to be modified and redesignated as the ZIS-S-53 gun) began in February 1944 at Factory No. 112. The improved T-34-85 became the standard Soviet medium tank, with an uninterrupted production run until the end of the war. A T-34-85 initially cost about 30 percent more to produce than a Model 1943, at 164,000 rubles; by 1945 this had been reduced to 142,000 rubles. During the course of the World War II, the cost of a T-34 tank was reduced by almost half, from 270,000 rubles in 1941, while in the meantime its top speed remained about the same, and its main gun's armour penetration and turret frontal armour thickness both nearly doubled.

The T-34-85 gave the Red Army a tank with better armour and mobility than the German Panzer IV tank and StuG III assault gun. While it could not match the armour or weapons of the heavier Panther and Tiger tanks, its improved firepower made it much more effective than earlier models, and overall it was more cost-effective than the heaviest German tanks.

Production figures for the T-34-85 alone reached 22,559.

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