The works began as the Warnemünde factory of Flugzeugbau Friedrichshafen, on the Baltic coast where the Warnow meets the sea. Like its parent it shut down after the First World War, when the Treaty of Versailles closed off German aviation. In 1921 Heinrich Lübbe bought the plant and restarted aircraft construction for export - Lübbe being the engineer credited with helping Anthony Fokker develop the Stangensteuerung synchronisation gear that let a machine gun fire through a spinning propeller in 1914-15. Walter Rethel, previously with Kondor and Fokker, came in as head designer. In 1925 the business joined Arado Handelsgesellschaft, a trading firm founded by the industrialist Hugo Stinnes Jr. for the specific purpose of covering up illegal trade in military equipment. Germany was not permitted to rearm. Arado existed, from early on, partly to make that inconvenience manageable.

Walter Blume, formerly of Albatros, replaced Rethel as chief designer in the early 1930s, and Arado found its market: the Ar 66 became one of the Luftwaffe's standard trainers, and the Ar 65 and Ar 68 were among its first fighters. Then in 1936 the Reich Aviation Ministry told Lübbe that, as a demonstration of loyalty, he should join the Nazi party. He refused. He was arrested and forced to sell the company to the state, which renamed it Arado Flugzeugwerke GmbH and placed it under Erich Serno and Felix Wagenführ. Expansion followed at speed. A new works at Brandenburg-Briest, begun in September 1934, was in production within three months and delivering aircraft by April 1935; by September 1939 it alone employed six thousand people. Satellite plants opened at Rathenow, Anklam, Nowawes near Potsdam, Alt-Lönnewitz, Landeshut, Sagan and Wittenberg. Arado's payroll went from 3,749 in July 1935 to 14,090 in 1938.

Most of Arado's designs lost their competitions. The firm spent much of the war as a subcontractor, building components and licence versions of the Focke-Wulf Fw 190 and serving as primary subcontractor on the Heinkel He 177, the only heavy bomber Germany fielded. Two of its own aircraft mattered: the Ar 96, which became the Luftwaffe's most-used trainer, and the Ar 196, a reconnaissance floatplane that ended up as standard equipment on every larger German warship. And then there was the Ar 234 Blitz. Powered by two Junkers Jumo 004 turbojets, it first flew on 30 July 1943 from Rheine, entered service in the autumn of 1944, and was the world's first operational turbojet-powered bomber. Around 214 were built. In March 1945 Ar 234s of III/KG 76 attacked the captured Ludendorff bridge at Remagen with 1,000 kg bombs, day after day, until it collapsed. The aeroplane was a decade ahead of its opposition and arrived far too late to matter.

Arado's peak workforce, 30,670 people on 30 June 1944, was overwhelmingly not there by choice. Dutch, French and Czech workers were brought in as the war went on; the He 177 work was carried out by labourers the German record lists as Balts, Serbs, Spaniards, French, Dutch and Belgians. At Wittenberg a camp sat directly against the western edge of the factory grounds. The clearest account concerns Freiberg in Saxony, a subcamp of the Flossenbürg concentration camp, where 1,012 forced labourers worked at the Arado factory. The first trainload of 249 arrived in August 1944. They were mostly Polish Jewish women and girls, sent to Freiberg from Auschwitz - people who had already survived a death camp and were then set to assembling aircraft parts through a German winter. They were liberated by the Soviet army in April 1945. Their labour is as much a part of Arado's production figures as the turbojets are.

The company did not survive the peace. In 1945 Arado was broken up; under the Potsdam Agreement the plants were dismantled and the machinery shipped east to the Soviet Union as reparations, with the corporate shell not formally wound up until 1961. Over four thousand aircraft had been completed at Brandenburg alone by April 1945. One Arado design outlived its maker: the Ar 96 stayed in production in Czechoslovakia, built by Zlín as the C.2B for years after the war. At Warnemünde the shipyards and the beach took the site back, and the seaside resort at the mouth of the Warnow now gives almost no sign that the first jet bomber's parent company started here.