In 1938 the Reichsluftfahrtministerium (RLM) made a requirement for a heavy bomber, with long range and dive bombing capabilities, known as the Ural bomber programme. Junkers used the Ju 89 for the competition and Dornier the Do 19. But Heinkel´s Projekt 1041 design, developed to the revised Bomber A requirement, was superior to its competitors. Designated He 177, the new aircraft had a tube like fuselage with glazed nose and tail gun positions, and a high aspect wing mounted in the middle of the fuselage, which provided room for a large bomb bay. The type required either four engines rated at 1,200 hp (895 kW) or two engines rated at 2,400 hp (1,790 kW), the latter configuration being chosen to reduce drag and increase manoeuvrability. However, the lack of a 2,400 hp engine prompted Heinkel, working in partnership with Daimler Benz, to combine a pair of DB 601 with a single gearbox, to produce the DB 606, which would be cooled by surface radiators.
At the time it entered service, the aircraft showed some massive problems. The pilots didn´t really like to fly it and it was used in combat even before these problems were fixed. The first prototype was powered by two DB 606 engines with a power of 2700 hp and it had its first flight in November 1939. Unfortunately it was noticed that the engines were producing excess heat in flight, especially between the inner cylinder banks. This excess heat would ignite fuel and oil that had collected in the lower cowling, causing fires which destroyed the planes in the sky. Those accidents were the reason for nicknames like Luftwaffenfeuerzeug (Luftwaffe's lighter). In addition, the oversized oil scavenge pumps allowed the oil to aerate and foam at heights over 19,685 ft (6,000 m), causing a breakdown in lubrication, and the engines were installed right next to the main spar, leaving no room for a firewall. 
Despite these accidents, work on the He 177 A-0 production prototype and the definitive aircraft He-177 A-1 was continued. Recommendations to modify the engines were ignored till about a hundred aircraft were built.
Dr Ernst Heinkel was not closely involved with the original design, and blamed all the difficulties with the aircraft on Ernst Udet's insistence that the type be capable of 60 degree dive attacks.[N 1]
All in all 1140 He 177 were built.
- ↑ During his interrogation after World War 2, Heinkel referred to the type as 'that accursed 177', and remarked that he looked more kindly on the He-111Z!