Penguin was originally developed in a collaboration between the Norwegian Defence Research Establishment (NDRE; Norw. FFI) and Kongsberg Våpenfabrikk starting in the early 1960s, with financial support from the U.S. and West Germany. US Navy test facilities and technical assistance were made available to facilitate development, It was the first NATO anti-shipping missile with an IR seeker instead of the commonly used active radar seeker. Both hardware and software have been updated since entering series production in 1972.

The Penguin can be fired singly or in coordinated-arrival salvoes. Once launched the launching craft is free to turn away as the missile is inertially guided until the autonomous terminal homing phase. Propelled by a solid rocket engine, latest variants of Penguin can perform random weaving manoeuvres at target approach and strike the target close to the waterline. It can perform a terminal bunt and weave manoeuvre. The 120-kilogram (260 lb) warhead (originally based on that of the AGM-12 Bullpup, built under license by Kongsberg) detonates inside the target ship by using a delay fuze. The MK3, when launched from high altitudes, can initially act as a glidebomb, only firing its rocket engine to extend range, or ideally to achieve maximum speed before hitting the target; for better penetration.