The Lancia 037 was a silhouette racer; while it was loosely based on the Lancia Montecarlo (also known as Scorpion in the US and Canadian markets) road car, they shared only the center section with all body panels and mechanical parts being significantly different. Steel subframes were used fore and aft of the production car center section, while most of the body panels were made from Kevlar.

The mid-engined layout of the Montecarlo was retained, but the engine was turned 90 degrees from a transverse position to a longitudinal position in order to decrease the vehicles polar moment and improve handling.

An independent double wishbone suspension was used on both the front and rear axles, with dual shock absorbers in the rear in order to cope with the stresses of high speed off road driving. The 037 is notable as it retained the rear-wheel drive layout that was nearly universal for rally cars of the pre-Group B period; nearly all subsequent successful rally cars used four-wheel drive, making the 037 the last of its kind.