After the success of the AT-AT project, the Empire looked for a way to make smaller cheaper versions of the same thing. The Emperor, who took a special interest in the design of military vehicles, suggested a two-legged walker. Since everyone else in the room was afraid of being killed, nobody pointed out how moronic this idea was. The AT-ST was fast-tracked, and put into production immediately. When the final product showed predicatable instability, Imperial Engineers scrambled to try and cancel the project, but, by that time, it had already been featured on the cover of the Empire's annual Life Day Wishbook.
AT-ST's were used all over the galaxy in a number of battle and security functions. Since very few people bothered fighting back against the Imperial war machine, the flaws of the design were not exploited often. During the Battle of Hoth AT-ST's were used for support, but the Rebels were far more concerned with the larger AT-AT's. During the Battle of Endor, however, a group of teddy bears quickly recognized the weaknesses of the AT-ST and destroyed several.