According to writer Jerry Pournelle: "DC-X was conceived in my living room and sold to National Space Council Chairman Dan Quayle by General Graham, Max Hunter and me." According to Max Hunter, however, he had tried hard to convince Lockheed-Martin of the concept's value for several years before he retired. Hunter had written a paper in 1985 entitled "The Opportunity", detailing the concept of a Single-Stage-To-Orbit spacecraft built with low-cost "off-the-shelf" commercial parts and currently-available technology, but Lockheed-Martin was not interested enough to fund such a program themselves.

On February 15, 1989, Pournelle, Graham and Hunter were able to procure a meeting with Vice-President Dan Quayle. They "sold" the idea to SDIO by noting that any space-based weapons system would need to be serviced by a spacecraft that was far more reliable than the Space Shuttle, and offer lower launch costs and have much better turnaround times.

Given the uncertainties of the design, the basic plan was to produce a deliberately simple test vehicle and to "fly a little, break a little" in order to gain experience with fully reusable quick-turnaround spacecraft. As experience was gained with the vehicle, a larger prototype would be built for sub-orbital and orbital tests. Finally a commercially acceptable vehicle would be developed from these prototypes. In keeping with general aircraft terminology, they proposed the small prototype should be called the DC-X, X for "experimental".