Carlo Abarth was sporting director of the Cisitalia racing team starting in 1947. The following year the manufacturer folded, and founder Piero Dusio flew to Argentina. Abarth, funded by Armando Scagliarini, took over Cisitalia's assets and on 31 March 1949 Abarth & C. was founded in  Bologna.  Carlo's astrological sign, Scorpio, was chosen as the company logo. From the Cisitalia liquidation Abarth obtained five 204 sports cars (two complete Spiders and three unfinished), a D46 single seater and various spares. The 204s were immediately rechristened Abarth 204 A. Abarth built and raced sports cars developed from the last Cisitalia cars. In addition to Guido Scagliarini, the "Squadra Abarth" racing team lined up celebrated drivers including Tazio NuvolariFranco Cortese and Piero Taruffi. Notably Tazio Nuvolari made his last appearance in racing at the wheel of an Abarth 204 A, winning its class in the Palermo–Monte Pellegrino hillclimb on 10 April 1950. Alongside racing, the company's main activity was producing and selling accessories and performance parts for FiatLancia, Cisitalia and Simca cars, like inlet manifolds and silencers.

On 9 April 1951 the company's headquarters were moved to Turin; Abarth began his well-known association with Fiat in 1952, when it built the Abarth 1500 Biposto on Fiat mechanicals.