The Danish Army took delivery of a quantity of M41 light tanks from the USA in the 1950s and in the mid-1980s decided to upgrade these to extend their lives into the 1990s.

After trials with prototype vehicles repowered by Falck Schmidt of Denmark, NAPCO International of the USA and FFG of Germany, the first power pack was selected by the Danish Army.

In addition to the installation of a new diesel power pack, which increases the range of action as well as being more reliable, many other modifications were incorporated to improve its fighting capability and battlefield survivability.

A total of 53 M41 light tanks was upgraded to the new standard, called the M41 DK-1, at a cost of DKr340 million (£31 million) with final deliveries being made in 1988.

The overall layout of the M41 vehicle has not been changed but some 70 improvements have been carried out. These include the replacement of the original petrol engine with a more fuel-efficient US Cummins VTA-903T diesel developing 465 hp (similar to that in . the Bradley Fighting Vehicle); installation of four forward-firing grenade dischargers either side of the turret (as already fitted to the Danish Leopard 1); installation of an NBC system in the turret bustle; a fire detection and suppression system; new battery installation; improved internal layout; redesigned stowage rack and bins; a heater; a new DISA 7.62 mm anti-aircraft machine gun mount on the turret roof in place of the 12.7 mm M2 MG; installation of side skirts similar to those on the Leopard 1; new electric gun controls, a thermal night vision system for the gunner with an integrated laser range-finder; a halogen searchlight mounted on the gun mantlet; a night vision periscope for the driver; and night vision goggles for the commander. A scavenger system has been fitted for the 76 mm gun breech and 7.62 mm coaxial machine gun.

Prior to the completion of the modernisation programme, the Danish Army had already taken delivery of a new AAl-developed 76 mm APFSDS-T round which has a significant increase in armour penetration characteristics over the existing ammunition. This round is also understood to have been purchased by Taiwan for its M41 light tanks.