Following the success of the AML armored car, Panhard decided to adapt the basic design into a light armored personnel carrier known as the M3. Designed entirely as a private venture, it featured 95% commonality of automotive components with the AML and retained the general shape and configuration with the most notable difference being the relocation of the engine from the rear of the vehicle to immediately behind the driver. This opens up space for the troop compartment which can fit up to 10 infantry, and which can access through two rear doors (each provided with a firing port) as well as two side doors between the wheels. Additionally there are six hatches, three on each side, which the troops can fire from. Like the AML, the M3 features a prominetly sloped glacis which is also angled to the sides, giving it a characteristic V-shape. Given the export nature of the M3, it has been made available with numerous armament configurations, most of which are based around either a 7.62-mm or 12.7-mm machine gun mounted on one or both of the two roof hatches (front and rear) or on turrets. Heavier armament including 20-mm guns can also be fitted. The M3 is fully amphibious and is propelled in the water by its wheels. Other features such as air conditioning and smoke grenades are optional. Aside from the basic APC, the M3 can also be configured as an anti-aircraft vehicle, as well as repair, command, engineer, radar, and internal security vehicles, as well as as an armored ambulance. As a result of this versatility, the M3 was an export success being adopted by over 30 countries mainly in Africa and the Middle East, with particularly large orders coming from Bahrain, Iraq, and Saudi Arabia. They have seen extensive actions in regional conflicts and civil wars, most recently in Iraq and Yemen, and hundreds remain in service to this day for military and internal security use.

The first prototype of the M3 was completed in 1969 followed by the first production vehicle in 1971. The basic APC version is known as the M3/VTT with the only other combat variant being the M3/VDA anti-aircraft vehicle with twin 20-mm cannon and an optional RA 20 radar. A radar vehicle is known as the M3/VSB which can carry a RASIT radar or an RA 20 set, where it can be paired with the M3/VDA. Non-combat versions include the M3/VAT repair vehicle, M3/VPC command vehicle, M3/VLA engineering vehicle and M3/VTS armored ambulance. Numerous other variants and conversions were proposed or were developed in an ad hoc manner by their users. A modernized version known as the M3 Buffalo with a more powerful engine was developed in 1986 but only saw very limited export orders.