Mercedes-Benz traces its origins to Karl Benz's creation of the first internal combustion engine in a car, patented in January 1886, and Gottlieb Daimler and engineer Wilhelm Maybach's conversion of a stagecoach by the addition of a petrol engine later that year. The Mercedes automobile was first marketed in 1901 by Daimler-Motoren-Gesellschaft (DMG) known as Daimler Motors Corporation in english.

Emil Jellinek, a European automobile entrepreneur, formed an agreement with DMG in 1900 for Wilhelm Maybach to design a revolutionary sports car for him, later to be called the Mercedes 35 hp. Emil Jellinek created the trademark in 1902, naming the 1901 Mercedes 35 hp after his daughter Mercedes Jellinek. Jellinek soon became a member of the DMG Board of Management and obtained the exclusive dealership for the new Mercedes 35 hp for France, Austria, Hungary, Belgium, and United States of America.

A new engine, developed for the model, would be called the Daimler-Mercedes engine, overcoming the problem of the Daimler name in France being owned by Panhard et Levassor.

Racing records set by the new Mercedes 35 hp model amazed the automobile world and DMG's sales shot up. DMG consolidated as an automobile manufacturer and the number of employees steadily increased from 340 in 1900 to 2,200 in 1904.

Mercedes was lodged as a trade name for DMG automobile models in 1902. The first Mercedes-Benz brand name vehicles were produced in 1926, following the merger of Karl Benz's and Gottlieb Daimler's companies into the Daimler-Benz company.