The GTO was the brainchild of Pontiac engineer Russell Gee, an engine specialist, Bill Collins, a chassis engineer, and Pontiac chief engineer John De Lorean. In early 1963, General Motors management issued an edict banning divisions from involvement in auto racing. At the time, Pontiac's advertising and marketing approach was heavily based on performance, and racing was an important component of that strategy. Jim Wangers proposed a way to retain the performance image that the division had cultivated with a new focus on street performance.

The name, which was DeLorean's idea, was inspired by the Ferrari 250 GTO, the highly successful race car. It is an acronym for Gran Turismo Omologato, Italian for homologated for racing in the Grand tourer class. The name drew protest from purists, who considered it close to sacrilege.