In January 1976, the „line-eight“ models of the W 114/115 series were replaced by a completely newly designed series with the internal designation W 123. The model range ranged from the 2.0-liter four-cylinder diesel with 55 hp to the 2.8-liter six-cylinder injector with 185 hp.
Technically, the new model range was based on the S-Class produced for three and a half years; Such as these, the new mid-range types also had a rear-axle axle, which had already been introduced in the „dash-eight“ models, as well as a double cross-bar front suspension with steering wheel radius 0. This also omitted the driving platform still used in the previous models . The numerous other safety-relevant design details, which had been realized for the first time in series 107 and 116, naturally also benefited the medium-class types. The most important improvement compared to the predecessor series was the even more stable safety passenger cell with reinforced roof frame structure, high-strength roof posts and door columns as well as reinforced doors. The energy absorption of the front and rear crumple zones could be significantly increased by the controlled deformation capacity of the front and rear sections.
A technical novelty was a variant of the safety steering column, which was realized for the first time in model series 123, in which the steering unit and jacket pipe were connected to one another by a corrugated pipe. The danger of penetrating the steering column into the car interior was further reduced by means of this corrugated tube, which could also buckle laterally in the event of an impact.
The two new petrol engines, a 2.0-liter gasoline engine with 109 hp and a 2.3-liter injector with 136 hp, replaced the tried and tested 2.0-liter and 2.3-liter units. Both engines, two different versions of the newly designed M 102 series four-cylinder engine, were designed for slightly inclined installation in order to keep the overall height as low as possible – a requirement which was particularly important in future generations of models. Despite a performance increase of 15% and 25% respectively, fuel consumption could be reduced by approx. 10%.