There were several major improvements to the Model 12 and 16. The case was changed to white and made slightly lower in height, though its footprint actually became a bit larger. The phosphor on the CRT went from white to the less-eye restraining green.

Where the Model II required four separate circuit boards, the new systems integrated most functionality into three boards on the mainboard. There was also room for up to six expansion cards.

The two disk drives were now half-height and double-sided, effectively doubling the storage capacity. Another major improvement was that the drives no longer spun continuously, as they did in the Model II.

The Model 16 (or 16A) was the more powerful sibling. It featured a 16-bit Motorola 68000 processor, allowing it to boot XENIX, and also came with more standard memory. The Model 12 could be upgraded to a Model 16 through hardware expansions.

Initially, both the Model 12 and 16 sold poorly due to a lack of software that utilized their new features. Rumors suggest that only around 2,000 units were sold. It wasn't until TRS-XENIX (a clone of Microsoft’s XENIX, itself a UNIX variant) was completed in 1983 that sales improved, and the systems began to be used by businesses as servers, often with terminals as additional workstations.

In July 1983, Tandy released the TRS-80 Model 16B, featuring a faster Motorola processor (running at 8 MHz) and more memory.

Within Europe, the Model 12 and Model 16(A) remain rare machines.