A few months after the Operation Barbarossa began in June, Z23 was transferred to northern Norway where she attempted to intercept one of the Arctic convoys returning from the Soviet Union and helped to lay several minefields.
The ship was laid down at Deschimag's Bremen shipyard as yard number W957 on 15 November 1938, launched on 15 December 1939, and commissioned on 15 September 1940.
Several Bristol Beaufort aircraft spotted Lützow and her escorts off the Norwegian coast and one managed to surprise them and torpedo the cruiser early on the morning of 13 June, forcing her to return to Germany for repairs.
The Germans thought that they were Soviet destroyers, but they were actually two British minesweepers, Hazard and Speedy, sailing to rendezvous with Convoy QP 6.
A week later, Z23 accidentally rammed Z24 in heavy fog on 20 January, forcing the latter to return to Wesermünde and the former to sail to Trondheim for repairs and a lengthy refit that lasted until August.
Engine problems prevented her from participating in Operation Regenbogen, an attack on Convoy JW 51B, at the end of the year.
Despite attacks by British coastal artillery and motor torpedo boats, the flotilla managed to pass through the Straits of Dover unscathed, but Z37 ran aground at Le Havre en route.
The flotilla provided distant cover for an attempt by the Italian blockade runner Himalaya to sail for the Far East on 28 March, but the ship had to return to Bordeaux after it was spotted by a British reconnaissance aircraft.
Two days later, the flotilla escorted the Italian blockade runner Pietro Orseolo through the Bay of Biscay despite the ship being torpedoed by an American submarine and under heavy attack by Bristol Beaufighter fighter-bombers and Beaufort torpedo bombers; the German destroyers shot down five of the attacking aircraft.
Himalaya made another attempt to break out on 9 April, but the ships were spotted by a Short Sunderland flying boat.
[7] Another blockade runner, the 2,729 GRT refrigerated cargo ship MV Alsterufer, trailed Osorno by several days and four destroyers, including Z23, of the 8.
The Allies were aware of these blockade runners through their Ultra code-breaking efforts and positioned cruisers and aircraft in the Western Atlantic to intercept them in Operation Stonewall.
They had been spotted by an American Liberator bomber on the morning of the 28th and the British light cruisers Glasgow and Enterprise, which were assigned to Stonewall, maneuvered to intercept them.
By this time, the weather had gotten significantly worse and the German ships were steaming for home, hampered by the rough seas that threw spray over their forward guns that made them very hard to work.
Using her radar, Glasgow was the first to open fire at the closest German ships, Z23 and Z27, at 13:46 at a range of 19,600 meters (21,400 yd) with Enterprise following a few minutes later.
The cruisers pursued the northern group and a hit in Z27's forward boiler room disabled one of her turbines and gradually reduced her speed.
The ship resumed escorting uboats through the bay, but was docked at La Pallice when she was attacked by 14 Avro Lancaster heavy bombers on 12 August.