Due to delays with the Cruiser Mark VII Cavalier and the need for cruiser tanks, the Crusader was up-gunned with the 57 mm 6-pounder, the first British tank to mount this gun. Design work for a new turret started in March 1941, but Nuffield was not involved until late in the year, when they adapted the existing turret with a new mantlet and hatch.
The turret also received an extractor fan to clear fumes from the firing of the gun. The larger gun restricted turret space, so the crew was reduced to three, with the commander also acting as gun loader, a role previously performed by the wireless operator. The auxiliary turret space was given over to ammunition stowage.
Crusader III also saw the introduction of the Mk. IV Liberty engine, fixing many of the reliability issues previously encountered. This featured the Mk. III engine's later updated water pumps along with a shaft drive replacing chain drive for the cooling fans.
Production started in May 1942 and 144 were complete by July. The Crusader III first saw action, with about 100 participating, at the Second Battle of El Alamein in October 1942.