In the early 1980s, the Indian government decided to produce a small car, affordable to the Indian middle class. The obvious place to shop for technology was Japan, which had developed world-class capabilities in small cars by that time. It was not Toyota or Nissan or Honda, the three largest players in Japan, with whom the government tied up, but Suzuki, a much smaller company, with strong capabilities in making small cars. Maruti was incorporated in 1981 by taking over the assets of the erstwhile Maruti Ltd, (set up in 1971 and wound up in 1978). In 1982, the government signed a joint venture agreement with Suzuki, which was offered a 26% equity stake in the company.

In 1985, another utility vehicle Gypsy, designed for tough road conditions, was launched. In the late 1980s, Suzuki increased its equity stake in Maruti from 26% to 40% and further to 50% in 1992. This converted Maruti into a non-government company, giving Suzuki a much freer hand in managing the affairs of the company.

In 1990, Maruti introduced a 3-box car, Maruti 1000. In 1993, it introduced a new model, the Zen with a 1300 cc engine, and Esteem, a variation of Maruti 1000 (which was replaced) with more power and a new exterior. Around this time, the first sign of conflict between the joint venture partners surfaced, when Suzuki proposed a Rs.22 billion expansion and modernization plan.