German arms development during World War II was quite the chaotic mess, in many ways. While it is not uncommon for different service branches to have independent procurement systems, in fascist-era Germany this was coupled with the close collaboration between industry and the Party structure. This led to competing and conflicting policies between military and political offices.
Semiautomatic rifle development was no exception. While the Walther and Mauser companies won the competitions to develop the Gewehr 41, the Gustloff concern had also produced a number of designs and these were continued after the trials by political decree. The best of these designs (apparently, from the sparse information available) was the model 206.
The Gustloff 206 is a largely sheet metal rifle with a gas piston operating system and an unusual vertically traveling locking block, akin to the Type 94 Nambu and Bergmann 1910 (as well as the much more recent Arsenal Strike One). The rifle is semiautomatic only (although it sounds like some select-fire models were also made) and feeds from MG-13 box magazines - cut down from 25 rounds to 10 rounds capacity on this example.
The rifle may be related to the Gustloff submission for the Luftwaffe’s FG-42 project, but may not be. All I have been able to find on that rifle is that Gustloff did submit one and it did not progress into any trials, most likely because it failed to meet the design criteria set out by the Luftwaffe. The model 206 would fit that description.