With its parent company, it ceased operations following the First World War, when restrictions on German aviation were created by the Treaty of Versailles.
In 1921, the factory was purchased by Heinrich Lübbe, who is said to have assisted Anthony Fokker in the creation of the pioneering Stangensteuerung synchronization gear system during 1914-15, and re-commenced aircraft construction for export.
In 1936, the RLM (Reichsluftfahrtministerium – "Reich Aviation Ministry") insisted that, as a show of loyalty, Lübbe should join the Nazi party.
It was renamed to the more specific (and accurate) Arado Flugzeugwerke GmbH, and was placed under the direction of Erich Serno, and Felix Wagenführ, himself a former IdFlieg officer in World War I.
Until their liberation in April 1945 by the Soviet army, 1,012 slave laborers from Freiberg, a sub-camp of the Flossenbürg concentration camp, worked at the Arado factory, beginning with the first trainload of 249 prisoners arriving in August 1944.