In response to a requirement from the US Navy SEALs in the early 1990s, a variant of the M16A2 was developed that retained the fully-automatic fire capability of the M16A1, but incorporated the various improvements to the design. The US Navy had previously upgraded some of its stock of M16A1s to retain the fully-automatic capability. Unlike the more basic upgrades to other M16A1s, the US Navy replaced the entire upper assembly, including the barrel. These weapons were referred to as M16A1 Heavy Barrels (M16A1H

. The new production weapon based on the M16A2 was initially designated M16A2E3, but was eventually type classified standard as the M16A3. These weapons remained in US Navy inventory even after the US Navy SEALs had begun to investigate other rifle types, being issued to Naval Construction Battalions and other units.