Soon the design became too different from the Skyray to be considered just a variation of it, and the aircraft was assigned a new designation as the F5D Skylancer. Almost every part of the airframe was modified, though the basic form remained the same as did the wing shape, though it became much thinner. The wing skinning was reinforced, correcting a problem found in the F4D. The fuselage was eight feet (2.4 m) longer and area ruled to reduce transonic drag, being thinner in the region of the wing roots. Everything was shaped to reduce drag and increase stability at high speed.
Although the four 20 mm cannon in the wing roots were retained, primary armament was to be missiles or rockets; four AIM-9 Sidewinders or two AIM-7 Sparrows, and/or a battery of spin-stabilized unguided 2 in (51 mm) rockets.
Nine test airframes were ordered, with a 51-aircraft production order to follow. Production aircraft were to be powered by the more powerful J57-P-14 engine, while there were plans to use the even more powerful General Electric J79.
The first flight was on 21 April 1956 and was supersonic; the aircraft proved easy to handle and performed well. After four aircraft had been constructed, however, the Navy cancelled its order. The stated reason was that the aircraft was too similar to the already-ordered F8U Crusader, but it is believed by some historians that politics played as big a part; Douglas was already building a very large proportion of the Navy's planes, and giving them the F5D contract would have made it even closer to monopoly. 
The four aircraft continued to fly in various military test programs. Two were grounded in 1961, but the other two continued to fly. Transferred to NACA (soon to become NASA) in the early 1960s, one was used as a testbed for the American supersonic transport program, fitted with an ogival wing platform (the type eventually used on Concorde; data from the program was shared with the European designers). This aircraft was retired in 1968. The other (pictured) was used for simulation of abort procedures for the X-20 DynaSoar, because it had a very similar shape and handling characteristics. Following the DynaSoar cancellation, it was used as a chase plane and for various other programs until it was retired in 1970. This last plane still exists at the Neil Armstrong Air and Space Museum at Wapakoneta, Ohio, since Neil Armstrong flew the aircraft during the DynaSoar research program. A second example of the F5D with NASA markings exists as part of Merle Maine's private collection in Ontario, Oregon.