At the time of development of the MP-41, Hugo Schmeisser was the chief designer at the C.G. Haenel company which manufactured MP-40 submachine guns for the German Army. It is possible that Schmeisser decided to develop a submachine gun which was better suited for infantry use than the MP-40. To achieve this end, he combined the receiver, action and magazine of the MP-40 with the wooden stock and select-fire trigger mechanism of the MP-28. C.G. Haenel produced a few MP-41 submachine guns, which were mostly purchased by SS troops.
In late 1941 the Erma company filed a patent infringement lawsuit against Haenel; as a result, C.G. Haenel was forced to close the production of the MP-41. Only 26,700 MP-41s were manufactured during the war.