On 9 December 1940 he replaced Admiral Inigo Campioni as commander of the entire battle fleet of the Regia Marina, with flag on the battleship Vittorio Veneto.

On 9 February 1941, Iachino led the Italian fleet in the unsuccessful pursuit of the British Force H, after the latter had bombarded Genoa and La Spezia.

He again commanded the Italian battle fleet in the Battle of Cape Matapan (26-29 March 1941), which resulted in the biggest defeat ever suffered by the Regia Marina; dismissing reports of nearby British battleships as incorrect or exaggerated, he sent the entire 1st Cruiser Division to the rescue of the stricken cruiser Pola, resulting in the annihilation of the entire division by the three battleships of Admiral Andrew Browne Cunningham's Mediterranean Fleet.

During the First Battle of Sirte (16 December 1941) and the Second Battle of Sirte (22 March 1942) the forces under his command clashed with the escorts of British convoys heading for Malta, but despite his superior strength Iachino – concerned about not underestimating the enemy forces (to the point of believing incorrect reports about nonexistent battleships) and avoiding night action, both of which had been his fatal mistakes at Matapan – did not press the attack and was unable to cause significant damage to the convoys, but were later sunk by Axis air attack.

Operation Vigorous (12-16 June 1942; known in Italy as the "Battle of Mid June") was instead his most important success; despite the losses caused by air and submarine attacks (the battleship Littorio was torpedoed, and the heavy cruiser Trento was sunk), he kept advancing towards the British convoy sailing from Alexandria to Malta, eventually leading to it aborting its mission and turning back to port.