The Palomino is the third generation of the Midget Mustang. The Midget Mustang was a 1948 midget racer developed by Dave Long, Piper's chief engineer. In early 1960s, Bert Wilcut acquired manufacturing right to the Midget Mustang and started to modify the design into the Palomino. Wilcut was involved in the re-engineering and development, along with Dave Lang, Art Mooney, Hal Cronkite, Bill Taylor, and Dick Kraft.
In 1962, the first Palomino was a single-seat aircraft made by the Palomino Aircraft Associates, later to become San Antonio Aviation located on Stinson Municipal Airport in San Antonio, Texas. This airplane was powered by a 125 hp Lycoming O-290. Its Federal Aviation Administration number is N40J.
In 1965, the original Palomino was modified to a tandem-seater with a 150 hp Avco Lycoming O-320 engine. Its span is now 28 feet 2 inches and length: 20 feet 7 inches but retained the N40J registration number.