In 1941, with Germany under increased night-time attack by the bombers of RAF Bomber Command, and with shortages of the Messerschmitt Bf 110 and the preferred Junkers Ju 88C night fighters, it was decided to supplement the night-fighter force with a version of the Do 217E, despite its much greater size and weight. This aircraft, the Do 217J, was fitted with a new "solid" nose, similar to that used by Dornier in night fighter versions of the Do 17 and Do 215, with four forward firing 2 cm MG FF cannon and four 7.92 mm machine guns. By October 1940, the production of heavy night fighters, and night fighters such as the Do 217 and Ju 88, had been discussed comprehensively and by 5 November 1941 these discussions had been concluded. On November 23rd, the Technische Amt (T.A) had ordered the Dornier bomber fleet to be withdrawn in accordance with a decision made earlier that year on 23 May. Dornier designated the subject of their new project the "Do 217Z", later renamed the Do 217J.

The Japanese Imperial Navy and Japanese Army Air Force had also taken an interest in license building the type in the summer 1942, demonstrating the types potential. The Luftwaffe had no intention of delivering the Do 217 to Japan. Owing to this none were ever exported. The Dornier encountered many problems in procuring the BMW 801 engines required for the night fighter versions. Junkers had also struggled with BMW deliveries, its Ju 88C variants were to be powered by the BMW as the initial Jumo 211B/F engine plan had been abandoned. The Do 217s competitor, the Ju 88C, had only four fixed guns, whereas the Dornier could hold eight. In most cases, the Ju 88C carried only one 2 cm MG FF and three 7.92 mm MG 17s.

In January 1941 Junkers concentrated on the C variant designs. It planned on producing 60 C-4s and 374 C-6s powered by Jumo 211s. It later transpired to Dornier that Junkers also wanted the BMW 801 to power the C-6. The power plants would also be supplemented with GM-1 nitrous oxide injection engine performance boosters for greater performance or alternatively, using the new, more powerful Jumo 213. The Ju 88s weaponry was improved by the addition of one or two MG FFs in the fuselage. Both the Do 217 and Ju 88 used the FuG 202 Lichtenstein B/C sets, but later Ju 88s were given FuG 212 Lichtenstein C-1s and later FuG 220s. The equipment of the Dornier did not change. Against this competition Dornier needed to improve the types abilities as a night fighter. The first problem Dornier attempted to overcome was long and short range capabilities. A modified E-1, (Wrk Nr. 42) was used to test the equipment for the forthcoming Do 217J. During testing the characteristics of the various types fire extinguisher hardware were carried out. Performance trials were carried out in January 1942 using a E-2, Wrk Nr. 1122 which was put through its paces at the Löwenthal testing facility.

Dornier intended the prototype to ready by February 1942. The machine, Wrk Nr. 1134, was a modified E-2 and equipped with FuG 202 and a Spanner-Anlage Infrared gun sight. These systems enabled the Dornier to detect the heat signature of enemy aircraft. Heat seeking detection at limited range making the Dornier a good proposition for the Defense of the Reich campaign. Testing was set back as the prototype crashed owing to engine failure. The continuing slow development of the IR equipment precluded its use in the J-1. Work on the IR program was sped up until late 1943. Modified IR equipment appeared in 1945 and was installed in the Ju 88 G-6.

Delays of BMW 801 engine deliveries forced the project to be temporarily abandoned. In November 1941 the directive for the design team had been a J-1 with a Spanner IR system, and a J-2 with Lichtenstein radar. In 1942 the directive changed slightly, and the J-2 was to be fitted with AI radar. Specifically, the Dornier was to be armed with four MG FF fuselage mounted cannon and machine guns for bomber assault, and one MG 131 each in the B-Stand and C-Stand positions for defence from RAF night fighters. Curiously, the night fighter version was ordered to be able to carry eight 50 kg bombs so the type could act as a night fighter and intruder over enemy territory.

The electronic equipment to be installed was listed as the FuG X, 16, 25 Peil G V air-to-ground communications and blind landing devices. The FuB1.1 was also listed as a potential piece, and if possible a FuG 101 radio equipment was to be fitted as standard. It was intended to equip J-1 with the Lichtenstein FuG 202, which had an effective range of 4,000 metre, with three tubes. The weight of the of equipment would reduce the performance of the J-1 by 30 – 40 kph so in January 1942, Dornier opted to install the IR spanner equipment instead of the Lichtensten. A rear braking system had also been in the original plan, but it was deemed unnecessary. The design was declared ready on 5 January 1942 and first flew later that month. The prototype was delivered to the Tarnewitz test facility where gunnery trials took place with MG FF and MG 17 weapons. Satisfied with the performance, series production began in March 1942.

Sources:
Gunston, Bill - The Encyclodepia of the Worlds Combat aircraft, 1976, Chartwell Books, Inc., New York
Brown, Eric, Captain - Wings of the Luftwaffe, 1979, Airlife Publishing Ltd., Shrewsbury
Gunston, Bill & Wood, Tony - Hitler's Luftwaffe, 1977, Salamander Books Ltd., London
Donald, David - The Complete Encyclopedia Of World Aircraft, 1997, Brown Packaging Books Ltd., London
Wikipedia - Dornier Do 217