The 126 used much of the same mechanical underpinnings and layout as its Fiat 500 rear-engined predecessor with which it shared its wheelbase, but featured an all new bodyshell closely resembling a scaled-down Fiat 127.
Engine capacity was increased from 594cc to 652cc at the end of 1977 when the cylinder bore was increased from 73.5 to 77mm.[3] Claimed power output was unchanged at 23PS (17kW), but torque was increased from 39N·m (29lb·ft) to 43 newton metres (32lb·ft).[3] The 594cc engines were still available in early 1983 production.
A subsequent increase took the engine size to 704cc in new "restyling" model Fiat 126 Bis (1987–1991), with 26PS (19kW) of motive power.
In Italy, the car was produced in the plants of Cassino and Termini Imerese until 1979. By this time 1,352,912 of the cars had been produced in Italy.
The car continued however to be manufactured by FSM in Poland, where it was produced from 1973 to 2000 as the Polski Fiat 126p. Even after the introduction of the 126 Bis (a 126p with water-cooled 704cc engine of indigenous Polish construction), the original model continued to be produced for the Polish market. The car was also produced under licence by Zastava in Yugoslavia. In 1984, the 126 received a facelift, giving it plastic bumpers (for all versions) and a new dashboard. This model named Fiat 126p FL. In 1994, the 126p received another facelift, and some parts from the Fiat Cinquecento, this version was named 126 EL. The 126 ELX introduced a catalytic converter.