In the 1960s, the Ministry of Aeronautics was evaluating foreign alternatives to replace the T-33A jets used for military training. Initially, the new aircraft were to be merely assembled in Brazil, with full domestic production to follow later. After assessing various options, the choice fell on the Aermacchi MB-326G jet, manufactured by the Italian company Aeronáutica Macchi. The aircraft had been designed in the 1950s and had been in service since 1962.

The manufacturing license agreement with Embraer was finalized in 1970, and the aircraft was named the EMB 326 Xavante, in honor of Brazil's warrior indigenous tribes. It would be the third model to enter production at Embraer and the first jet manufactured in Brazil.

On May 29 of that year, the Ministry of Aeronautics signed a contract to order 112 units of the aircraft. Embraer sent engineers to take training courses in Varese—where Macchi was based—while Italian technicians traveled to Brazil. To meet the needs of the Brazilian Air Force (FAB), certain modifications were made to the original model. In addition to its training role, the Xavante would also serve technical and military support functions.

On September 3, 1971, the Xavante made its maiden test flight, piloted by Air Force Major Carlos Rubens Resende and test pilot Brasílico Freire Neto. The flight lasted approximately 90 minutes and covered the São José dos Campos area, drawing great enthusiasm from the Brazilian media, which was covering the "first jet manufactured entirely in the country."

On the 7th of that month, it made its first official flight during Brazil's Independence Day celebrations. The following day, the first three Xavante aircraft—designated AT-26 by the military—were delivered to the Brazilian Air Force (FAB). By December 1976, the FAB had acquired 119 Xavantes.

Embraer produced 182 units of the EMB 326 Xavante: 167 for the FAB, nine for Paraguay, and six for Togo.