A new chassis, designated Mark III, was designed in cooperation with Ford in Detroit. The Mark III chassis was built using 4 inch main chassis tubes, up from 3 inch, and coil spring suspension all around (an especially significant change up front, where the previously used transverse leaf spring had done double duty as the top link). The new car also had wide fenders and a larger radiator opening. It was powered by the Ford 7.0 L (427 cu in) FE "side oiler" engine.

When the legendary driver Ken Miles first introduced the 427ci engine to a Shelby Cobra in the “Flip Top” prototype 427 Cobra it took the Cobras performance to a whole new level. The Shelby Cobra now had the powerplant necessary to outrun the competition including Grand Sport Corvettes, 250 GTOs, and GT40s, and that's exactly what it did on its debut race at the Nassau Bahamas race in 1964.

With this discovery of the incredible performance potential of the 427ci, Shelby’s original plan was to build 100 427 competition Roadsters which would be homologated for FIA racing.

Shelby was planning on running a factory effort with these cars in the 1965 season. Unfortunately when the FIA arrived at Shelby American in April 1965 only 51 cars were built and Shelby was forced to run the 289s again in the 1965 season. AC Cars built just over 50 Competition Cobras with the newly redesigned bodies and chassis. The cars’ bodies became wider and featured larger front and rear flares and nose opening, in fact only the doors, hood and trunk lid were taken directly from the 289 Cobras design. The Chassis was also redesigned with 4 inch main rails for more rigidity to handle the 427 power plant. The 427 chassis was also given independent suspension with coil overs which gave the car better handling performance.

By the time the 1965 race season came to a close Shelby had only sold 16 competition cars that were actively being raced. Due to not getting the 427 homologated for the FIA and the GT40 program in full swing, the 427 Competition cars became difficult to sell.

It was at this point that Charles Biedler, Shelby’s East Coast Sales Representative, stepped in with a bright idea; why not offer a mildly de-tuned version to produce perhaps the most potent road car ever. Thus the 427 S/C or Semi/Competition or Street/Competition Cobras were born. The S/C cars were nearly identical to a standard 427 Competition model with a 427 side oiler of which was highly underrated at 425 horsepower. Some features that carried over from the Comp car include side exhausts, oil cooler, roll bar, hood scoop, external filler cap, 42-gallon fuel tank and even quick-lift jacking points were all carried over from its Competition counterpart.

The only real difference being the S/C cars had mufflers in the side pipes and most came with holley 2x4 carburetors. It was only the 427 S/C cars that were originally delivered with the ultra desirable 2x4 carbs and a side oiler, no street cars had this combination.

Performance of the new S/C Cobra was earth shattering for its time, with 60 mph achieved in barely four seconds while still spinning the tires. As if further confirmation of the 427’s staggering capability were needed, Ken Miles reportedly achieved a zero-to-100 mph-to-zero time of just 13.2 seconds! At the time the S/C car was the fastest production car in the world.