The prototype first flew on August 7 1951 flown by test pilot Robert Edholm, and first test flights of the operational design were in January 1953. The engine was a major disappointment, producing only half of the expected power. Worse, it was temperamental and unreliable. Of 35 F3H-1N aircraft flown with the J40 engine, eight were involved in major accidents. The J40-engined aircraft were grounded and a new engine was sought. The proposed F3H-1P reconnaissance version was never built.
The best alternative was the Allison J71 engine which was also used in the B-66 Destroyer. Subsequent F3Hs with this engine were designated the F3H-2N. Use of this engine required an enlarged wing and redesigned fuselage. In service, the J71 proved problematic, providing insufficient power for an aircraft of the Demon's size. The engine also suffered from frequent flameouts and compressor stalls. The first Demon with a J71 flew in October 1954. Another significant problem was the reliability of the ejection seats: initial versions would found to be unreliable and were eventually replaced with Martin-Baker ejection seats that were becoming the standard Navy seat of choice due to their higher performance at low altitude and better reliability.
Despite the problems, the Navy ordered 239 F3H-2s, and the first were deployed in March 1956. 519 Demons were built up to the end of production in November 1959. It was not the Navy's first all-weather interceptor with radar (the AN/APG-51 air interception set was used first on the F2H-4 Banshee). The F3H-2 Demon had the AN/APG-51A, later upgraded to the 51-B version with a tuneable magnetron then on to 51- C with better counter measures in the receiver.
The F3H-2N's standard armament was four 20 mm Colt Mk 12 cannon. In later years the upper two cannon were often omitted to save weight. Later models, redesignated F3H-2M, were equipped to fire the Raytheon AAM-N-2 Sparrow and later the Sidewinder air-to-air missiles. Deployed aircraft carried both types of missiles, the Sparrow on the inboard rails and the Sidewinder outboard. Cannons were not used in carrier air defense applications, but they were installed and armed when situations (such as the Cuban Missile Crisis) dictated, and where the aircraft might be deployed against surface targets.
A reconnaissance version, the F3H-2P, was proposed, but never built. It remained the Navy's front-line fighter until 1962, when it was succeeded by the F-4 Phantom II (which was a development of a proposed "Super Demon," a larger and much heavier version of the F3H; this concept would again see life in the 21st century with the F/A-18E/F Super Hornet, a much larger and more capable version of the F/A-18 Hornet). Although developed during the Korean War, it did not see action, although it flew over Lebanon and Quemoy in 1958.
In 1962 the F3H was redesignated F-3. The F3H-2N became the F-3C, while the F3H-2M became MF-3B and the F3H-2 simply F-3B.
The last Demon-equipped squadron, VF-161 'Chargers', traded their F-3s for F-4 Phantom IIs in September 1964.
Due to excellent visibility from the cockpit, the Demon earned the nickname "The Chair." Demon pilots were known colloquially as "Demon Drivers" and those who worked on the aircraft were known as "Demon Doctors." The unfavorable power to weight ratio gave rise to the less flattering nickname "lead sled" sometimes shortened to "sled".