Federico Faggin, designer of the Intel 4004, and Ralph Ungermann, from the Intel 8080 team, left Intel in late 1974 to start their own company. Masatoshi Shima, who had done the transistor-level design of the Intel 8080, joined them in April 1975. With venture funding from Exxon Enterprises, the three founded Zilog.

The plan was a 5-volt chip that stayed binary compatible with the widely used Intel 8080 while borrowing features from the Motorola 6800, aiming to win over both camps at once. Shima implemented the design with 8,200 transistors, well above the 8080's 4,800. An 11-person team delivered a working prototype on March 9, 1976, exactly on schedule, with the entire project costing under $400,000.

The Z80 ran on an 8-bit data bus and a 16-bit address bus, executed all 78 Intel 8080 instructions plus extras, carried 20 8-bit registers and 4 16-bit registers, and could address up to 64 kilobytes of memory.

The chip ended up in home computers including the Radio Shack TRS-80, the SORD M23P and M5, the Sinclair ZX81 and ZX Spectrum, and the Kaypro II, most of them running CP/M. It lost PC market share once Intel's 16-bit chips arrived in the mid-1980s, but stayed embedded in industrial and consumer electronics.

Zilog still manufactures Z80-based microprocessors and peripheral controllers today. Its enhanced eZ80 variant runs inside the Texas Instruments TI-84 and TI-84 Plus calculators, keeping a fifty-year-old architecture in classrooms.