During early 1938, the Hs 126 underwent service evaluation; it was well received for its good short takeoff performance and low-speed flight characteristics, attributes that proved to be frequently useful during its operational history.

The Hs 126 saw combat on numerous fronts, the first occasion being with the Legion Condor contingent that participated in the Spanish Civil War during the late 1930s.

On 12 September 1943, a number of Hs 126s were used to tow ten DFS 230 attack gliders from Pratica Di Mare airfield near Rome to the Gran Sasso on a raid to rescue Benito Mussolini.

It was withdrawn from Luftwaffe service in 1943, by which point the Hs 126 had been superseded by the Fieseler Fi 156 Storch, a general-purpose STOL aircraft, as well as the twin-boom Focke-Wulf Fw 189 Uhu.

Both the second and third prototypes were powered by the Bramo 323 radial engine; the former was fitted with a supercharger, an enlarged rudder, and twin tailplane bracing struts.

[7] During late 1938, six Hs 126s were dispatched to Spain, where it replaced the He 45s being flown by the Legion Condor; it saw live combat during the latter portion of the Spanish Civil War.

[7] Daylight reconnaissance flights by the Hs 126 were typically flown beneath an altitude of 2,000 meters; at night time, this decreased further to almost tree-top level.

[10] A higher loss rate was incurred on the Eastern Front, to the extent that fighter aircraft were more commonly used to protect the type during missions.

[11] On 12 September 1943, a number of Hs 126s were used to tow ten DFS 230 attack gliders from Pratica Di Mare airfield near Rome to the Gran Sasso on a raid to rescue Benito Mussolini.

[12] At the outbreak of Greco-Italian War of 1940–41, the Royal Hellenic Air Force (Ellinikí Vasilikí Aeroporía, RHAF) had in service 16 Henschels, with 3 Observation Mira, under III Corps, based in Thessaloniki and Veria.

A first Henschel was hit and crashed, killing its observer, Pilot Officer Evanghelos Giannaris, the first Greek aviator to die in the war.