The effective ground attack capabilities of the earlier Halberstadt CL.II were realized late in 1917. With this successful adaptation of the CL.II, design work began on an improved version, specifically intended for the ground attack role. The Halberstadt CL.IV was one of the best ground attack aircraft of World War I. It performed well in combat as a low-level attack airplane, relying on its good maneuverability to avoid ground fire. After supporting the desperate late German offensives in 1918, Halberstadt CL.IVs were used to disrupt advancing Allied offensives by striking at enemy troop assembly points. When not on close support or ground attack missions, it was used as a standard two-seat fighter for escort work. Towards the end of the war, on bright, moonlit nights, CL.IV squadrons attempted to intercept and destroy Allied bombers as they returned from their missions. Night sorties against Allied airfields were also made with the CL.IV.

The Halberstadt CL.IV was one of the most effective ground attack aircraft of the First World War. It appeared on the Western Front towards the end of the German offensives in 1918. Flights of four to six aircraft flew close support missions, at an altitude of less than one hundred feet, suppressing enemy infantry and artillery fire just ahead of the advancing German troops. After these late German offensives stalled, Halberstadt CL.IVs were used to disrupt advancing Allied offensives by striking at enemy troop assembly points.

Karl Thies, chief designer of the Halberstadter Flugzeug-Werke, G.m.b.H., designed the CL.IV as a replacement for the Halberstadt CL.II. The CL.II had been developed in mid-1917 to meet the new CL (light C-type) specification for a maneuverable, two-seater to serve as an escort for C-type reconnaissance and photographic patrol aircraft. Powered by a 160-horsepower Mercedes D.III engine, the CL.II was tested in May 1918, at Adlershof, and was found to be aerodynamically sound with fine performance. The design also permitted excellent visibility and easy crew communication because the pilot and the observer/gunner shared a common cockpit. Approximately 900 CL.IIs were built. Production continued though the summer of 1918.

The ground attack capabilities of the Halberstadt CL.II were demonstrated late in 1917 when it was deployed with great success in coordinated attacks against British forces during the Battle of Cambrai. The low-flying Halberstadt CL.IIs were an effective support weapon and a tremendous morale booster for counterattacking German troops. With this successful adaptation of the CL.II, design work began on an improved version, specifically intended for the ground attack role.

Designated the CL.IV, the new airplane had a strengthened and shortened fuselage, with a horizontal tail surface of greater span and higher aspect ratio than the CL.II. These changes, along with a one-piece, horn-balanced elevator, gave the CL.IV much greater maneuverability than its predecessor. Like the CL.II, its fuselage was plywood-skinned and still incorporated the shared cockpit. The CL.IV retained the 160-horsepower Mercedes D.III engine of the earlier model, although the spinner was omitted in favor of rounded cowls that enclosed the engine completely, giving the airplane a more aggressive look. Two fixed, forward-firing, Spandau machine guns could be mounted on the CL.IV, but typically only one was fitted. The observer/gunner had a Parabellum machine gun on an elevated, movable mount. Anti-personnel grenades in boxes were carried on the fuselage sides, and rows of cartridges for a Very pistol were often strapped across the rear fuselage decking. After tests were completed of the Halberstadt CL.IV prototype in April 1918, at least 450 were ordered from Halberstadt, and an additional 250 aircraft from a subcontractor, L.F.G. (Roland).

The Halberstadt CL.IV performed well in combat as a low-level attack airplane, relying on its good maneuverability to avoid ground fire. When not on close support or ground attack missions, it was used as a standard two-seat fighter for escort work. Towards the end of the war, on bright, moonlit nights, CL.IV squadrons attempted to intercept and destroy Allied bombers as they returned from their missions. Night sorties against Allied airfields were also made with the CL.IV.

The source of the NASM airplane was a collection of Halberstadt CL.IV aircraft and spare parts obtained shortly after the First World War by Paul Strähle, a former fighter pilot who had served with Jagdstaffel 18. In 1919, he acquired three complete surplus Halberstadt CL.IVs, spare parts, engines, and three additional fuselages. He intended to use the Halberstadts as a nucleus of a civilian passenger transport service called Luftverkehr Strähle. Under the terms of the Treaty of Versailles, these aircraft and spares were initially confiscated by the Inter-Allied Control Commission, but later were sold back to Strähle and assigned civil registration. The first of the three complete airplanes was reassembled and flight operations began in 1921. This Halberstadt was put on public display in Germany in the 1960s. One of the other aircraft was sold in 1924, and the third was flown by Strähle until 1938. This Halberstadt, along with all of the spare parts and fuselages still in Strähle's possession, were put in storage at that time.

In 1982, Strähle sold the one remaining complete Halberstadt and the spare parts and components to Ken Hyde and Stan Parris of Warrenton, Virginia. They in turn traded all the Halberstadt equipment to the United States Air Force Museum for six surplus North American T-28 trainers in 1984. In addition to the one complete airframe, there were sufficient parts to assemble two more Halberstadts. The National Air and Space Museum had earlier expressed interest in the Halberstadt collection, one of the fuselages in particular, because it had flown in combat during the First World War and it still retained its original German camouflage paint. The fuselage, serial number 8130, was later determined to have been built under license by L.F.G. (Roland), making it even more rare and valuable. In October 1984, the U.S. Air Force Museum donated to NASM the historically significant fuselage and a set of wings, a tail section, and a large number of other spare parts.

In 1987, author and World War I aviation authority, Peter M. Grosz, working on behalf of the Museum fur Verkehr and Technik (MVT), later renamed the Deutches Technikmuseum, in Berlin, suggested a cooperative arrangement by which MVT would restore all three Halberstadts: the NASM example and the two airframes still in the possession of the U.S. Air Force Museum. In return, MVT would keep one of the Air Force Museum aircraft for its own collection. An agreement between the parties was struck, and in February 1989 the Halberstadts were prepared for shipment to Germany. The restoration of NASM's Halberstadt CL.IV was completed by MVT in June 1991.