It was designed in response to a
RLM requirement for a Heimatschutzjäger - a light fighter aircraft suitable for purely defensive duties and which would have a secondary role as an advanced
trainer for fighter pilots. Although it was not strictly a requirement of the specification, firms submitting designs were urged to use a
monoplane layout.
During trials in 1934, the He 74 outperformed its competitors, but in the end, the RLM awarded it third place, behind the
Focke-Wulf Fw 56 and
Arado Ar 76, believing that since the fighters then being developed were all monoplanes, this configuration was essential for an advanced trainer as well.