Dassault had developed the Mirage 5 at the request of the Israelis. When the French government prevented the aircraft from being delivered to Israel and cut off support for the Israeli's existing Mirage IIICJ fleet, the Israelis simply produced the Mirage 5 themselves without a license, using manufacturing specs obtained by Israeli intelligence. There is an elaborate cloak-and-dagger story behind this exercise that doesn't quite eliminate the suspicion that the Israelis were discreetly helped by Dassault in this effort, with the French government turning a blind eye to the whole matter.

These suspicions have a sound basis in fact. Marcel Dassault, before the war, was Marcel Bloch, producer of the Bloch series of fighters before the German occupation. As a Jew, he naturally suffered the persecution the Nazis were exposing all of Europe to, and Bloch was sent from camp to camp through the war. He narrowly escaped death in Auschwitz, by some accounts escaping death by a matter of hours as the American expeditionary forces entered the gates of this terrible place. He returned to France as soon as he was able, and re-established his aircraft company. Being of Jewish extraction, he therefore was happy to take a lead in France's contributions of armaments to the new state of Israel. The sudden refusal of the French government to provide the Mirage V, after the proving in combat of the Mirage III for all the world to see in the Six Day War, prompted the Dassault to make his gift to Israel in the form of the Mirage V's complete blueprint set, minus that of the Atar engine. (The events described have been set forward semi-fictitiously in the novel Mirage by Ken Follett)

The Nesher ("Eagle") was a complete copy of the Mirage 5, except for the use of some Israeli avionics, a Martin-Baker zero-zero ejector seat, and provisions for a wider range of AAMs, including the Israeli Shafir heat-seeking missile.

The first Israel Aircraft Industries (IAI) Nesher prototype flew in September 1969, with production deliveries to the Heyl Ha'Avir beginning in 1972. These aircraft performed well during the 1973 Yom Kippur War, claiming over a hundred kills.

51 Nesher fighters and 10 Nesher two-seat trainers were built in all. As mentioned earlier, most of these aircraft were refurbished and exported to Argentina in 1978-1982, under the name "Dagger". The Argentineans received 35 "Dagger A" single-seat fighters and 4 "Dagger B" two-seat trainers.