In the late 1960s Agusta designed the A109 as a single-engined commercial helicopter. It was soon realised that a twin-engined design was needed and it was re-designed in 1969 with two Allison 250-C14 turboshaft engines. A projected military version (the A109B) was not developed and the company concentrated on the eight-seat version the A109C.  The first of three prototypes made its maiden flight on 4 August 1971.  A protracted development then followed and the first production aircraft was not completed until April 1975. Delivery of production machines started in early 1976. The aircraft soon became a success and was soon used for roles other than as a light transport including as an air ambulance and search-and-rescue. In 1975 Agusta returned again to the possibility of a military version and trials were carried out between 1976 and 1977 with five A109As fitted with Hughes Aircraft TOW missiles. Two military versions were then developed, one for light attack or close support and another for naval operations.

Fuselages of A109 are made by PZL-Świdnik. In June 2006 the 500th fuselage was delivered by this manufacturer, marking 10 years of co-operation between the two companies.

The sale of the Agusta A109 to the Belgian armed forces in 1988 gave rise to a bribery scandal when it was alleged the company had given the Belgian Socialists over 50 million Belgian francs to get the sale. This scandal led to the resignation and conviction of NATO Secretary General Willy Claes.

The Agusta A109 became renamed the AW109 following the July 2000 merger of Finmeccanica S.p.A. and GKN plc's respective helicopter subsidiaries Agusta and Westland Helicopters to form AgustaWestland.

In August 2008, Scott Kasprowicz and Steve Sheik broke the round-the-world speed record using a factory-standard AgustaWestland Grand, with a time of 11 days, 7 hours and 2 minutes. The A109S Grand is also the fastest helicopter from New York to Los Angeles.