The old-established C.G. Haenel Waffen und Fahrradfabrik of Suhl dates back to 1840 and for much of the early life of the company it was a gunsmithing and metalworking business. The first contact wht handguns appears to have been as a contractor, making the Commission-designed Reichsrevolver (q.v.) in the early 1880's. Gunmakers V.Chr. Schilling and Spangenber & Sauer formed a co-operative venture with Haenel to produce the guns, which were stamped S&S Y.C.S.C.G.H. Suhl or later V.C.S.C.G.H. Suhl accordingly.
In 1921 Hugo Schmeisser, who had been working for theodor Bergmann, came to Haenel as chief engineer. He brough a 6.35mm blowback automatic pocket pistol design which he patented in 1920.
Production of this pistol began in 1922, continuing until 1930. A revised patter appeard in abut 1927, whereupon the original version became the Model 1 and the new model was the Model 2