Two months later a second attempt was made and a new No.38 Squadron formed at Castle Bromwich on 14 July 1916. Intended as a Home Defence unit for the West Midlands, it was equipped with RAF B.E.2c aircraft at first but, on moving base to Melton Mowbray in September, it was re-equipped with RAF F.E.2b aircraft. The squadron operated in a dual role, being used for pilot instruction during the day and air defence at night. This latter involved patrols on every night that Zeppelins were anticipated in the squadron's area (the unit had detached flights at Leadenham, Buckminster and Stamford), and No.38 was operational in this role for months from January 1917.
In May 1918 the squadron was withdrawn from the Home Defence role and transferred to Dunkirk where it became a night bomber squadron, still with its F.E.2b aircraft. Its first raid was flown against Ostend docks on 13 June 1918, when 10 of the squadron's aircraft took part. No.38 only saw five months of operations, during which time it made 47 raids, principally on the German canals, railways, dumps and airfields in Belgium. It remained in Belgium until the end of the war then, after a couple of months in France, returned to England without its aircraft and was disbanded at Hawkinge on 4 July 1919.
On 16 September 1935 the squadron reformed at Mildenhall by expanding 'B' Flight of No.99 Squadron to full strength. It was again a night bomber squadron, equipped with Handley Page Heyfords; these were by way of being interim equipment as far as No.38 was concerned, because it was to be one of the first RAF squadrons to re-equip with a monoplane bomber, the Fairey Hendon. These began arriving in November 1936, but it was the following summer before all the Heyfords had gone. No.38 Squadron was the only unit fully equipped with this type, which it flew for two years, taking part in all the air exercises of the period.
At the end of 1938 it received the first of the new Vickers Wellington bombers, and then in the forefront of Bomber Command, was declared operational on the outbreak of war. Its early shipping sweeps over the North Sea were inconclusive, but on 3 December 1939 it was part of a force of Wellingtons attacking shipping off Heligoland. During the raid the squadron destroyed one enemy fighter, although little success came from the bombing.
In 1940 No.38 Squadron began night raids, and these became regular from May 1940 onwards. The Channel ports and the Ruhr were the normal targets, but occasionally the squadron flew farther into Germany, reaching as far as Berlin later in the year. However, in November No.38, like No.37, was withdrawn from operations and despatched to the Middle East to form a night bomber wing there.
It began operations soon after setting up base at Fayid and joined in the regular attacks on Italian ports along the North African coast in order to hamper the movement of supplies to the Italian forces in the Western Desert. This became the normal duties of No.38 Squadron, but it also went farther afield, especially after Germany had taken over Greece, the Greek islands and Yugoslavia. For a whole year the squadron was thus employed, but at the end of 1941 experiments had been carried out with the possibility of using the Wellington as a torpedo bomber, equipped with a couple of 'tin fish'.
By January 1942, one flight of the squadron was hard at work training in this shipping strike role (its Wellingtons soon dubbed 'Fishingtons'). The next month the whole squadron transferred to No. 201 Naval Co-operation Group and began a period of operations ex-clusively against enemy shipping, flying between Italy and north Africa and amongst the Greek Islands. For these purposes the squadron did not rely on torpedoes alone, and in fact most of its sorties were mining trips. It was May 1942 when the first successful torpedo attacks were made on a convoy, resulting in two hits and one ship beached.
The squadron now had de-tachments in Malta, along the Western Desert and in Palestine. It amassed much experience in shipping attacks, which it was able to pass on to the other Wellington squadrons that subsequently joined it in the offensive against Mediterranean shipping. In the summer of 1943 No.38 acquired Wellington Mk VIIs with ASV radar (these aircraft became known as 'Goofingtons'), and the squadron was now in the business of flying its own hunter/killer teams; the first success in this role occurred on 26 August, when a tanker was found, torpedoed and sunk.
Successive versions of the Wellington joined the squadron during the year, these being better equipped to deal with submarines, and the change was timely because, with North Africa and Sicily cleared of Axis forces, the principal maritime threat in the Mediterranean had become the U-boat. This meant that No.38 dropped its torpedo role and flew as a normal maritime reconnaissance unit. At the end of 1944 it moved to Greece and then on to the Italian mainland, where most of its 'trade' was in the Adriatic, although it was involved in maritime cover for the landings in southern France.
Otherwise it concentrated on antishiping work around the coasts of northern Italy for the rest of the war, interspersed with an occasional burst of supply flights to Yugoslavia. Just before the war ended the German midget submarines came into operation in the area and No.38 set itself against these with some success. The war over, it turned its attention to air sea rescue work and to flying around the coasts of its area looking for mines.
No.38 transferred to the ASR role completely in July 1945, moving to Malta for the purpose, with detachments in Greece and North Africa. For this it soon reequipped with Vickers Warwicks, but these only lasted just over a year before being replaced by Avro Lancasters, and now the squadron again took on a maritime reconnaissance role with ASR as its secondary duty. The squadron was based at Malta, but in the following years it also had detachments at Gibraltar and in Egypt.
The Lancasters gave way to Avro Shackletons in 1954, and with these it flew on the same task at Malta until 1967. During this time it sent detachments elsewhere when required, taking part in the Beira patrols during the period of Rhodesian UDI and occasionally being deployed in the Persian Gulf. The end came for No.38 Squadron in 1967, when it was disbanded at Hal Far on 31 March.