Originating from a USAF requirement to replace its elderly Cessna T-37s in the primary training role, the Fairchild T-46 was a small side-by-side trainer with advanced aerodynamics (from Burt Rutan) and fuel-efficient turbofan engines. A pressurized cabin was fitted, and a wide range of avionics was installed to minimize loss of training time to bad weather. It was selected as the winner of the New Generation Trainer competition in July 1982, having been preceded by a 62 per cent scale flying model which validated the technology incorporated in the design.

Two prototypes were covered by the initial contract, the first of which flew at Edwards AFB on 15 October 1985. The second flew at Fairchild's Farmingdale plant on 29 July 1986. In addition to the standard T-46A, Fairchild proposed an AT-46A with four underwing hardpoints for weapons training. On 14 January 1987 the first of 10 production T-46As under construction flew: at the time a run of over 650 aircraft was envisioned. However, on 13 March the USAF announced that the T-46A program was terminated, citing production delays and escalating costs as the reasons. In place of the T-46, the Air Force embarked on a cheaper T-37 update program, and more recently has issued the JPATS requirement for a T-37 replacement.