In 1936 the Imperial Japanese Navy drew up a requirement for an aircraft to replace the Aichi Type 96 Reconnaissance Seaplane as a specialised night reconnaissance aircraft, intended to spot naval gunfire in night actions and to shadow enemy forces at night, allowing submarines to be directed to targets. The requirement was passed to Aichi and Kawanishi, with both companies producing aircraft to meet the navy's needs. While Aichi produced a biplane similar to the aircraft that was to be replaced, Kawanishi designed a gull winged cantilever monoplane. It was powered by a single Hiro Type 91 W engine in a pusher configuration, mounted on struts above the wing and driving a four-bladed propeller. The radiator was mounted in a fairing above the rear fuselage so that it was located in the propeller's slipstream. It was fitted with retractable wingtip floats, while its wings folded to aid storage aboard the cruisers of the Japanese Navy.
The first of two prototypes of Kawanishi's design, the Experimental 11-Shi Special Reconnaissance Seaplane, with the short designation E11K, made its maiden flight on 11 June 1937. It proved to have poor stability and water handling, while the engine installation overheated. It was unsuitable for the night reconnaissance role, with the Aichi design proving generally superior and being ordered into production as the Aichi E11A.
The two prototypes were fitted with retractable beaching gear, in order to serve as a utility transport aircraft, and was accepted into service by the Japanese Navy as the Type 96 Transport. These aircraft were used as liaison aircraft for reconnaissance seaplane squadrons and remained in use well into the Second World War.