Codenamed X400, the X-Type was Jaguar’s attempt to compete in the compact executive car segment. Jaguar and parent company Ford envisaged the ‘baby Jag’ as Jaguar's first compact 4-door. The X-Type was one of the last to be styled under the supervision of Geoff Lawson, with the principal designer credited as Wayne Burgess.
Neither Jaguar nor Ford had a suitable small rear-wheel drive platform to base the X-Type on, and the decision was made to base the X-Type on a modified version of the Ford CD132 platform, the basis for the 2000 Ford Mondeo. In order to distinguish it from its rivals and its Ford origins, the X-Type was initially offered as all-wheel drive only and mated to a 2.5 litre and 3.0 litre V6 petrol engine. In 2003, the X-Type was offered in front-wheel drive with the introduction of Jaguar’s first diesel engines, and with the smaller 2.0-litre petrol V6.
In 2004, a further body style was added with the introduction of a estate version, making it the second-ever Jaguar estate car. In the United States, the estate was officially known as the "Sportwagon”.
In 2007, the X-Type was facelifted and sports a different front grille, front bumper, rear bootlid, and rear bumper, to give the car a more dynamic and contemporary look. The new grille echoes the grille on the 2008 XF, and the facelifted 2008 XJ.
Despite the X-Type competing in the growing compact executive sector, sales never met expectations of 100,000 annually, peaking at 50,000 in 2003. In the United States, the car's primary market, sales dropped from 21,542 in 2004 to 10,941 in 2005. In the same year, Audi sold 48,922 A4s, BMW sold 106,950 3-series and Mercedes-Benz sold 60,658 C-Classes. Despite this, the X-Type has been Jaguar's bestselling model since its introduction.
Due to poor sales and reduced profit margins, stemming partly from a weaker United States dollar, Jaguar ceased sales of the X-Type in North America in late 2007.