Douglas built its first experimental observation aircraft in 1923 and delivered 45 production-version O-2s in 1924. On February 16, 1925, a contract was signed with the Army for 75 more, the largest single contract the company had received up to that time. More than 250 O-2s were built in 11 versions over a five-year period.

These models were so different from one another that is surprising the Army retained the O-2 designation. What all the O-2s had in common were welded steel-tube fuselages, fabric-covered wooden wings and the bulky but durable World War I Liberty engine. Like any aircraft produced in large numbers over a span of years, later O-2 variants incorporated many design improvements. Some O-2s had more streamlined fuselages and two-bladed metal propellers instead of the previous wooden ones. Others were modified as basic trainers by the addition of flight controls and instruments in the rear cockpit.

The Douglas O series of observation biplanes were among the most important American military aircraft produced during the 1920s and early 1930s. They saw service with the U.S. Army, Navy, Marine Corps, National Guard units and even the U.S. Coast Guard. Between 1923 and 1936, Douglas produced a total of 879 biplanes in O series including 770 for the U.S. military services, 108 to foreign air forces and one as a civil aircraft.