Ilić and Sivčev's new streamlined low-wing monoplane design had a retractable undercarriage.
Like the IK-2 it was initially developed privately by the two men.
A scale model was tested in the Eiffel-built wind tunnel in Paris, but the pair soon realised that they needed a third engineer to help evaluate the design and determine the structural details.
Slobodan Zrnić, the head of construction at the Yugoslav State Aircraft Factory in Kraljevo, was recruited, as he had worked as a specialist aircraft engineer in France.
The project name for the IK-2 was changed from IK, standing for (Ljubomir) Ilić and Kosta (Sivčev), to IKZ, to include Zrnić.
This name was changed, possibly due to the similarities between the Cyrillic "З" (Z) and the Arabic numeral "3", and the aircraft became known as the IK-3.
The aircraft was to be powered by a Hispano-Suiza 12Y29 engine, generating 980 hp (730 kW) at an altitude of 5,000 m (16,000 ft).
The designers favoured manoeuvrability over speed, trying to find a compromise between the German and British concepts of a modern monoplane fighter.
The design had a smaller wing area than the Hawker Hurricane and the Supermarine Spitfire, to achieve a higher speed for the engine power.
In comparison to the Messerschmitt Bf 109, the Yugoslav design had a shorter fuselage and smaller turning radius.
It differed from British and German design concepts in that its proposed armament was concentrated in the fuselage.

The designs were delivered to the VVKJ in time for approval by mid-1936, but a general reluctance to adopt new concepts delayed the IK-3, and a contract for the production of the prototype was not signed until March 1937.
The company selected for construction was Rogožarski A.D. in Belgrade.
The first flight of the prototype was carried out by the VVKJ Test Group towards the end of May 1938 and the aircraft was then flown by a group of VVKJ officers who were to determine the best employment for it within the VVKJ, along with tactics to be used in Yugoslav conditions.
These pilots observed that the controls were highly sensitive; the only real criticisms related to the visual distortion caused by the curved panels of the canopy.
Some pilots believed that the fuselage-mounted armament should be supplemented by two wing-mounted machine guns.
The test pilots also had to compare the performance of the IK-3 with the Hawker Fury, Heinkel He 112, Morane-Saulnier M.S. 405 and Hawker Hurricane.
They concluded that the IK-3 most closely matched the Morane-Saulnier; the Yugoslav aircraft was 40 km/h (25 mph) faster.
In November 1938, the VVKJ placed an order with Rogožarski for 12 aircraft.

On 19 January 1939, test pilot Kapetan Milan Pokorni put the prototype into a steep dive.
When he reached 400 m (1,300 ft), the windscreen detached from the aircraft; Pokorni pulled up hard and the strain broke off half of the starboard wing.
The aircraft crashed, and Pokorni was killed.
An inquiry determined that modifications to the windscreen had contributed to the accident.
Engineers recalculated the stress factors on the airframe and they were found to be safe, and the main factor had been the pilot's handling of the highly sensitive controls.

The loss of the prototype and some changes in the construction of the production model delayed the fulfilment of the contract.
Further tests were conducted on the wing and it was found to withstand a g-force of 14.
Modifications were made for the production model, including the use of flat plexiglass panels in the windscreen and the canopy to provide better visibility.
The instrument layout was improved and the upper rear fuselage behind the pilot's seat was re-shaped.
The folding undercarriage leg covers were replaced by single plates.
The main changes were the replacement of the engine with a modified version of the Hispano-Suiza 12Y engine made under licence by the Czechoslovak company Avia and the replacement of the Hispano-Suiza HS.404 cannon by a Swiss-made Oerlikon FF 20 mm cannon.
The replacement engine was less powerful, generating 860 hp (640 kW) at 4,000 m (13,000 
Ilić and Sivčev's new streamlined low-wing monoplane design had a retractable undercarriage. Like the IK-2 it was initially developed privately by the two men. A scale model was tested in the Eiffel-built wind tunnel in Paris, but the pair soon realised that they needed a third engineer to help evaluate the design and determine the structural details. Slobodan Zrnić, the head of construction at the Yugoslav State Aircraft Factory in Kraljevo, was recruited, as he had worked as a specialist aircraft engineer in France. The project name for the IK-2 was changed from IK, standing for (Ljubomir) Ilić and Kosta (Sivčev), to IKZ, to include Zrnić. This name was changed, possibly due to the similarities between the Cyrillic "З" (Z) and the Arabic numeral "3", and the aircraft became known as the IK-3. The aircraft was to be powered by a Hispano-Suiza 12Y29 engine, generating 980 hp (730 kW) at an altitude of 5,000 m (16,000 ft). The designers favoured manoeuvrability over speed, trying to find a compromise between the German and British concepts of a modern monoplane fighter. The design had a smaller wing area than the Hawker Hurricane and the Supermarine Spitfire, to achieve a higher speed for the engine power. In comparison to the Messerschmitt Bf 109, the Yugoslav design had a shorter fuselage and smaller turning radius. It differed from British and German design concepts in that its proposed armament was concentrated in the fuselage.
The designs were delivered to the VVKJ in time for approval by mid-1936, but a general reluctance to adopt new concepts delayed the IK-3, and a contract for the production of the prototype was not signed until March 1937. The company selected for construction was Rogožarski A.D. in Belgrade. The first flight of the prototype was carried out by the VVKJ Test Group towards the end of May 1938 and the aircraft was then flown by a group of VVKJ officers who were to determine the best employment for it within the VVKJ, along with tactics to be used in Yugoslav conditions. These pilots observed that the controls were highly sensitive; the only real criticisms related to the visual distortion caused by the curved panels of the canopy. Some pilots believed that the fuselage-mounted armament should be supplemented by two wing-mounted machine guns. The test pilots also had to compare the performance of the IK-3 with the Hawker Fury, Heinkel He 112, Morane-Saulnier M.S. 405 and Hawker Hurricane. They concluded that the IK-3 most closely matched the Morane-Saulnier; the Yugoslav aircraft was 40 km/h (25 mph) faster. In November 1938, the VVKJ placed an order with Rogožarski for 12 aircraft.
On 19 January 1939, test pilot Kapetan Milan Pokorni put the prototype into a steep dive. When he reached 400 m (1,300 ft), the windscreen detached from the aircraft; Pokorni pulled up hard and the strain broke off half of the starboard wing. The aircraft crashed, and Pokorni was killed. An inquiry determined that modifications to the windscreen had contributed to the accident. Engineers recalculated the stress factors on the airframe and they were found to be safe, and the main factor had been the pilot's handling of the highly sensitive controls.
The loss of the prototype and some changes in the construction of the production model delayed the fulfilment of the contract. Further tests were conducted on the wing and it was found to withstand a g-force of 14. Modifications were made for the production model, including the use of flat plexiglass panels in the windscreen and the canopy to provide better visibility. The instrument layout was improved and the upper rear fuselage behind the pilot's seat was re-shaped. The folding undercarriage leg covers were replaced by single plates. The main changes were the replacement of the engine with a modified version of the Hispano-Suiza 12Y engine made under licence by the Czechoslovak company Avia and the replacement of the Hispano-Suiza HS.404 cannon by a Swiss-made Oerlikon FF 20 mm cannon. The replacement engine was less powerful, generating 860 hp (640 kW) at 4,000 m (13,000 
Rogožarski IK-3