In 1934 tests began on an improved Stahlhelm, whose design was a development of World War I models. The Eisenhüttenwerke company of Thale (rumoured) carried out prototype design and testing, with Dr. Friedrich Schwerd taking a hand.

The new helmet was pressed from sheets of molybdenum steel in several stages. The size of the flared visor and skirt was reduced, and the large projecting lugs for the obsolete armor shield were eliminated. The ventilator holes were retained, but were set in smaller hollow rivets mounted to the helmet's shell. The edges of the shell were rolled over, creating a smooth edge along the helmet. Finally, a completely new leather suspension, or liner, was incorporated that greatly improved the helmet's safety, adjustability, and comfort for each wearer. These improvements made the new M1935 helmet lighter, more compact, and more comfortable to wear than the previous designs.

The Army's Supreme Command officially accepted the new helmet on June 25, 1935 and it was intended to replace all other helmets in service.

More than 1 million M1935 helmets were manufactured in the first two years after its introduction, and millions more were produced until 1940 when the basic design and production methods were changed.