The Ford team in charge of naming the Mustang went through many possibilities, including Cougar, Torino, and Venice. Mustang was finally decided upon; #1- because WWII had ended no too long ago, and the P-51 Mustang Fighter airplane played an incredibly important role in the war; and #2- The Mustang (horse) represented an untameable spirit which they thought would perfectly represent the car and its intended buyers. This is also why the galloping horse logo is running the opposite way that trained racehorses run around a track - that it will always be a free spirit, and follow its own will.
R.H. Bob Maguire, my boss, and I were looking through a list of names for the car. I had been reading about the P-51 Mustang airplane and suggested the name Mustang in remembrance of the P-51, but Bob thought the name as associated with the airplane was too 'airplaney' and rejected that idea. I again suggested the same name Mustang, but this time with a horse association because it seemed more romantic. He agreed and we together selected that name right on the spot, and that's how it got its name.
From "Mustang Genesis: The Creation of the Pony Car" by Robert A. Fria
Taken from the Ford Website.
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