After M16, chambered in 5.56x45, entered US Army service in 1964, Soviet design engineers started development of their own low recoil round.
This ammunition allows reduce the weight of the loadout carried by the soldiers, lighter bullet has higher velocity, which leads to better accuracy and flatter trajectory.
In the early 70s, a group of design engineers lead by V. Sabelnikov completed development of the new round, and in 1974, new assault rifle, AK74, entered service. New weapon was very similar to AKM, which allowed starting mass production very quickly.