In mid-1944, with coastal defense requirements becoming urgent, the Japanese Navy developed an improved version of the Type A, B & C midget submarines. Designated "Type D" and nicknamed "Koryu", the new design was somewhat larger than the earlier types, featured a more powerful diesel engine and had improved operating endurance. The "Koryu" also had a five-man crew, two more than in the Type C, but the same armament of two 45cm (17.7") diameter torpedoes.

The Type D midgets displaced about 60 tons and were 86 feet long. Propelled by a 500 horsepower electric motor, maximum submerged speed was 16 knots. On the surface, with an 150 HP diesel charging the electric batteries, speed was 8 knots and range about 1000 nautical miles. As with the earlier types, individual boats had alpha-numeric names in the "HA" series.

The the first Type D boat, HA-77, was completed in January 1945. Some 115 units had been completed when Japan capitulated in August 1945. Nearly 500 more were under construction. Some of these submarines, intended for training pilots for "Kaiten" type manned torpedoes, had an enlarged conning tower and two periscopes.