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The origins of the original SIG company lies in a factory created in 1853 by Friedrich Peyer im Hof, Heinrich Moser and Conrad Neher. Upon winning a contract to produce 30,000 , they changed their name to Schweizerische Industrie Gesellschaft (SIG), German for "Swiss Industrial Company". SIG began work on designing a pistol that would balance price with quality. Swiss law limits the ability of Swiss companies to manufacture arms and Swiss companies who wish to do this have to do so by using a foreign partner. In the case of SIG they chose the German firm of . Thus, the SIG SAUER line of handguns began in the 1970's starting with the SIG Sauer in 1975. Pre-WWII, Sauer had been primarily a maker of shotguns and hunting rifles. During the war they produced the . However, after the war, Sauer had retreated from this market. With SIG, Sauer returned to the business of manufacturing handguns.

The P226 was designed for entry into the XM9 Service Pistol Trials, which were held by the in 1984 on behalf of the to find a replacement for the . Only the and the SIG P226 satisfactorily completed the trials. According to a report, Beretta was awarded the contract for the 92F due to better durability during endurance testing and a lower total package price, however, the US Navy Seal teams started using the SIG P226 during the 1980's.