It was formed following the German surrender in June 1945 from the 2nd wartime formation of the 7th Estonian Rifle Division.

On its formation the 118th Guards inherited the honorific title and decoration of the 7th, with its full title being 118th Guards Rifle Estonian, Tallinn,[1] Order of the Red Banner[2] Division.

This re-designation took place nearly two months after V-E Day, but before the Soviet invasion of Manchuria, so technically the 118th Guards can be considered a wartime formation, although it did not see combat in Manchuria.

In February 1946 General Allikas was replaced in command by Maj. Gen. Johan Yakovlevich Lombak, who had previously commanded the 249th Estonian Rifle Division (later 122nd Guards Rifle Division).

The division was downsized into the 22nd Guards Separate Rifle Brigade in 1946.