In 1965, Ford excelled tremendously with a more sophisticated emergence of the Mustang. Not only had it been popular among individuals in America, but all across the world. Nevertheless, Ford had to overcome some obstacles when they discovered that a couple of German companies had entitlement to the name "Mustang." A Mustang in Germany had to either be a truck or a dirt bike. Ford persisted and overcame the copyright setback by coming up with a different name. Therefore, they decided to use the Ford code-word for a Mustang before it was created, which was "T-5." Ford had to be careful because of copyright issues so they had to remove anything that contained the logo "Mustang." They decided to just replace those with the Ford embossment. Fenders also had to be altered to mount the unique "T-5" emblems they had fashioned. Ford also had to recreate the owner's manual without the Mustang name. Some modifications to adapt the car to Europe's roads included a kilometer-per-hour speedometer, instead of the familiar miles-per-hour, and a tauter export brace in position of the usual weak shock-tower-to-cowl braces. These effective alternatives help make the Mustang, or "T-5" legal, as well as operable, in Germany.

Besides delivering the Mustang all across the world, Ford had another goal in mind which was to create a car that could race in Sports Car Club of America, or SCCA, Production Category B amateur racing. Therefore, Ford left this chore to Carroll Shelby, who had previously been successful racing and improving the Ford Cobras.

The first 100 cars, that Ford specially ordered, were white fastbacks with black interiors and came with a special instrument pod in the middle of the dashboard housing a tachometer and oil pressure gauge. They painted all of these with two wide Guardsman Blue racing stripes running from nose to tail. The interior of the 1965 GT350 contained all the stock parts of a regular Mustang plus Shelby's signature wooded steering wheel and three inch wide competition seat belts. In the GT350 street cars, they used c-pillar vents. These cars had a 289-ci 271 horsepower engine, four-speed transmission, and a nine-inch rear end. On all of the cars, they rebuilt the engines and suspensions then changed the hood, nose, and grille.

The mustang was then improved further when they increased the 289's output to 306 horsepower by adding an aluminum Cobra high rise intake manifold, a 715-cfm Holley center-pivot float carburetor, finned aluminum Cobra valve covers, an extra-capacity aluminum oil pan, and a Tri-Y exhaust header. They also installed glass packed bullet mufflers to give the engine a rich rumbling exhaust and assist the engine with better breathing. The exhaust pipes extended only to the rear wheels. They then used rear traction bars, Koni shocks all around, stabilizer bars to stiffen the suspension, and lowered the upper "A" arms. The heart of the car required a one-piece export-type brace joined to the shock absorber towers and firewall. They customized front and rear suspensions extensively, exchanged stock 5/8 inch anti-sway bars with more durable one inch diameter pieces and inserted override traction bars.

The mustang was then sent to Ford division's Mustang-Cobra project engineers. They further added an export brace, a "Monte Carlo bar", larger disc brakes, and massive Fairlane station-wagon rear drums. They then inserted a cross engine compartment rod that connected left and right front fenders to strengthen the body and chassis, an aluminum case Borg-Warner close ratio, four speed type T-10 transmission, and topped it all off with the signature emblem Ford positioned on all of the T-5 Mustangs they had shipped to Europe. The finished Shelby GT350 project rode vigorously and drove fiercely.

On only these first 100 cars, the batteries were transferred to the trunk to enhance weight balance. Later, consumers protested that battery acid fumes were eating away the inside rear deck lids and were trickling into the passenger's side. Because of the many complaints, Ford then moved the batteries back to the front of the car on models starting from 1975 on.

As Ford finished with this long successful labor, they then required a new name for this improved Mustang. With this difficult task, it was mandatory to have legal approval, and a name that could stay current as the engine improved and, or was modified because emblems and written information would have to be updated continuously. Therefore, this task was given to Carroll Shelby. Many other manufacturers had simply used numbers, but Shelby wanted to create a name that could stay with a car numerous years, if not a lifetime, without being touched.

As many have known the tale, Shelby glanced to the other side of the street and came upon a simple, yet unique way of solving his problem. As he sat there, he simply looked at his chief engineer Phil Remington and asked him to estimate how far away he believed a building was from where they were. After a long debate, and many guesses, Remington paced it off at 350 feet. Then, with a quick reply, Shelby said, "Fine. Let's call the little car the GT350. If the car's good, then the name won't matter. And if it's no good, then the name won't matter."

As for the race cars, Shelby's team took apart the engine and forwarded the heads to increase and buff up intake and exhaust valve ports then balanced connecting rods, crankshafts, and pistons. New-found requirements arranged for a high capacity Holley 715 CFM, or cubic feet of air per minute, carburetor with a center-pivot float that kept the engine from flooding through hard curves. Street engines created 306 horsepower when the race cars made roughly 350 to 360 horsepower when put through dynamometer tests. At this point, street Mustangs sold for only $4,547 whereas the race cars sold for $5,995.