On 1 May 1954, Nash-Kelvinator merged with the Hudson Motor Car Company to form American Motors Corporation (AMC). The initial run of the Nash Rambler was then built by AMC in Kenosha, Wisconsin, until 1955.

The Nash Rambler established a new segment in the automobile market and is widely acknowledged to be the first successful modern American compact car. This Rambler model also established the idea of a small but luxurious economy car.

From 1950 through 1955, the Nash Rambler was the first production for this platform. American Motors reintroduced an almost identical "new" 1958 Rambler American for a second model run. This was a rare feat of having two distinct and successful model runs, an almost unheard-of phenomenon in automotive history.

Nash-Kelvinator's President George W. Mason saw that the company needed to compete more effectively and insisted a new car had to be different from the existing models in the market offered by the "Big Three" U.S. automakers. Mason also realized the fundamental problem that had eluded other automakers trying to market smaller-sized cars to Americans: low price was not enough to sell in large volumes, but "also had to be big enough to appeal to families as their primary car." Therefore, the Rambler was designed to be smaller than contemporary cars, yet still able to accommodate five passengers comfortably. Nash engineers had initially penned the styling during World War II.

The new car was the company's entry into the lower-price segment dominated by Chevrolet, Ford, and Plymouth models. The Rambler was designed to be lighter and have smaller dimensions than the other popular cars. With a strategy focused on efficiency, Nash could save on materials in its production while owners would have better fuel economy than other cars of the era. The Nash Rambler rode on a 100 in (2,540 mm) wheelbase, and power came from Nash's proven 172.6 cu in (2.8 L) L-head (flathead) straight-6 cylinder engine that produced 82 hp (61 kW; 82 hp).

Following the design of the larger "senior" Nash models, the compact Rambler's styling was rounded in form and also had an envelope body – Nash's characteristic styling with fender skirts that also enclosed the front wheels.^[This design feature did not impair the car's cornering ability significantly.

The compact Rambler line was designed with several body styles, but the inaugural year was limited to a single model: a fully equipped 2-door fixed-profile convertible. The decision to bring the new car out first in a higher market segment with more standard features was a calculated risk by Mason. Foremost in this strategy was the need to give the new Rambler a positive public image. Mason knew the car would fail if seen by the public as a "cheap little car". This was confirmed in small car comparisons in the media that described the "well-equipped and stylish, the little Rambler is economical and easy to drive" with no "stripped-down" versions, but available in only high-end convertible, station wagon, or hardtop (no "B-pillar") body styles. He knew what Crosley was finding out with its line of mini cars, and what the Henry J would teach Kaiser Motors; namely, that Americans would rather buy a nice used car than a new car that is perceived as inferior or substandard.

Like other fixed-profile convertibles, the Rambler retained the bodywork's doors and rear-side window frames, unlike traditional convertibles that used frame-free side windows. This metal structure served as the side guides or rails for the retractable waterproof canvas top. This design allowed Nash to utilize its unibody construction on its new compact. It made the body very rigid for an open-top car without the need for additional bracing. The strength of the windshield pillars and roof-rail structure was demonstrated by the entire vehicle flipped upside down, and the rails and supports were undamaged. The convertible top is cable-driven and electrically operated. The design is similar to other fixed-profile convertibles, including the 1936 Fiat 500 "Topolino", Nissan Figaro (1991), Citroën 2CV (1948–1990), Vespa 400 (1957), and the 1957 Fiat 500 (1957) as well as its 2007 Fiat 500 successor.

In developing this new car, Nash had planned planned to call it the Diplomat. This name would have rounded out the Nash family of vehicles; since starting with the 1950 model year, the 600 line was renamed the Statesman, and the Ambassador remained the flagship line. When the managers learned that Dodge had already reserved the Diplomat name for a planned two-door hardtop body style, Nash delved into its past, and resurrected the Rambler name from an 1897 prototype and its first production model, in 1902. Rambler was also one of the popular early American automobile brands. On 22 May 1950, the automaker filed trademarks for the Rambler and also the Statesman names.

The historical context of the Nash Rambler, along with the Nash-Healey and later the Metropolitan, was that U.S. citizens were exposed to and gained experience with the smaller, more efficient compact, and sporty European cars during the Second World War. Nash's CEO had also visited Italy, France, and England to observe the development of small vehicles in those markets. Some of the styling cues for the convertible Rambler came from Italian designs. The new car's input included the approach of more compact cars that came from Nash-Kelvinator having vast markets overseas. This influence is also seen directly in the Pininfarina-designed models. American Motors would later continue to import European design and styling flair to incorporate into its products, such as the Hornet Sportabouts by Gucci, the Javelins by Pierre Cardin, and the Matador coupes by Oleg Cassini.

After offering only two-door-only models, Nash introduced a four-door sedan and a four-door station wagon in the Nash Rambler line starting with the 1954 model year. This was the automaker's response to demands of larger families for more roomy Ramblers. The four-door body styles rode on a longer, 108 in (2,743 mm) wheelbase. Following the industry practice at the time, the heater and radio were now made optional. Added to the options list was Nash's exclusive integrated automobile air conditioning system, a "very sophisticated setup" for the time incorporated heating, ventilation, and air conditioning in one system that was "priced lower than any other competing system; at $345, it was a remarkable advance."

The four-door Rambler sedan was at first only available in "Custom" trim. The "Country Club" hardtop became available in the lower-priced "Super" trim and without the "Custom" model's standard Continental tire (external spare tire carrier). The 4-door station wagons were designated Cross Country. They featured an unusual roofline that followed the slope of the sedan's roof, then dipped down behind the rear seat area before leveling and continuing rearward. The design by Bill Reddig allowed the use of the same dies to produce door framing for sedans and station wagons, while the dip in the rear portion of the roof included a roof rack as standard equipment to reduce the visual effect of the wagon's lowered roofline.

There was turmoil in the U.S. automobile market as the Ford-Chevy sales war broke out and the two largest domestic automakers cut prices to gain sales volume. This battle decimated the remaining independent automakers in their search for customers. The marketing battle put a squeeze on the much smaller independent automakers, so even though the Nash Rambler economy cars proved popular in the marketplace, they were not particularly profitable for the company.

On 1 May 1954, Nash and Hudson Motor Car Company announced a merger, and the successor corporation was named American Motors Corporation (AMC). Following the merger, Hudson dealers began receiving Ramblers that were badged as Hudson brand cars. The Hudson Ramblers and Nash Ramblers were identical, save for the brand name and minor badging.

The Nash Rambler's most significant change for the 1955 model year was opening the front wheel wells resulting in a 6-foot (2 m) decrease in the turn-circle diameter from previous year's versions, with the two-door models having the smallest in the industry at 36 ft (11 m). The "traditional" Nash fixed fender skirts were removed and the front track (the distance between the center points of the wheels on the axle as they come in contact with the road) was increased to be even greater than was the Rambler's rear tread. Designers Edmund Anderson, Pinin Farina, and Meade Moore did not like the design element that was insisted by George Mason, so soon as Mason died, "Anderson hastily redesigned the front fenders." Tongue-in-cheek, Popular Science magazine described the altered design for 1955: the "little Rambler loses its pants."

As part of the facelift for 1955, the Rambler's grille was also redesigned with only the center emblem differentiating the cars now sold by both Nash and Hudson dealers. The Rambler was a new model for Hudson dealers and it replaced the compact Hudson Jet.

The interiors of the economical Nash Rambler were designed by Helene Rother to also appeal to the feminine eye. American Motors featured "Created to Your Discriminating Taste" in the car's marketing knowing what women looked for in a car and Rother's designs featured elegant, stylish, and expensive fabrics that coordinated in colors and trim.

Model and trim combinations were again reshuffled with a two-door Suburban and Club two-door sedans available in "Deluxe" or "Super" versions. Four-door sedans and wagons came as Super or Custom models, while a new Deluxe four-door sedan was introduced. The pillarless Country Club hardtop was reduced to only the "Custom" trim, while the convertible model was no longer available.

Fleet sales-only versions included a Deliveryman wagon that was not shown in the regular catalog, as well as another new model, a three-passenger business coupe: a two-door sedan with no rear seat.

The automaker's marketing efforts included sponsorship of the Disneyland television show on the American Broadcasting Company (ABC) network. The inaugural broadcast was on 25 October 1955; just five days after the new Ramblers debuted in both Nash and Hudson dealerships, and the Disney show quickly became one of the top-watched programs in the U.S., thus helping AMC sell more cars.

The focus continued on fuel efficiency and economy of operation. A Rambler four-door set a new record for cars with automatic transmissions achieving 27.47 mpg_-US (8.56 L/100 km; 32.99 mpg-imp) in the 1955 Mobil Economy Run.

The U.S. domestic market was turning to bigger and bigger cars; therefore, prospects for the compact Nash Rambler line were limited and production was discontinued after the 1955 model year.