It was formed on 15 September 1943 and saw service during World War II transporting supplies and personnel between Australia and the combat zones in New Guinea and Borneo, using Douglas Dakota aircraft.

38 Squadron was deployed to Singapore from 1950 to 1952, supplying Commonwealth forces engaged in the Malayan Emergency and undertaking courier flights across Asia.

38 Squadron served as the RAAF's operational conversion unit for the type and also conducted transport tasks within Australia and its territories.

Equipped with Lockheed Hudsons, the squadron conducted its first operation on 17 December, when one of its aircraft flew from Richmond to RAAF Base Darwin.

[2] While the squadron continued to fly to locations within Australia after receiving Dakotas, it also began transporting supplies to Allied forces fighting the Japanese in western New Guinea.

38 Squadron's only loss during World War II was a Dakota that crashed on a mountain in western New Guinea while flying between Biak and Morotai; the wreckage of this aircraft was not located until 1970.

This mission, which was designated "Operation Pig Bristle", took two weeks and sought to rectify a shortage of paint brushes that was hindering the Australian construction industry.

38 Squadron's main responsibilities was to conduct thrice-weekly courier flights to Japan to support the Australian element of the British Commonwealth Occupation Force.

As an element of this force, the Australian Government agreed for the unit to be tasked with courier flights across Asia and providing support for the British-led counterinsurgency operations in Malaya.

38 Squadron began flying transport missions in Malaya in early July, with British and New Zealand pilots accompanying its aircrews during the first two weeks of operations to help them become familiar with local conditions.

38 Squadron's main task was to conduct courier flights to Borneo, Ceylon, Hong Kong, Indonesia, Japan and the Philippines, and these remained an important responsibility throughout the period it was based at Singapore.

41 Squadron RNZAF was stationed at RAF Kuala Lumpur, and was the main unit tasked with dropping supplies to Commonwealth forces in the field.

38 Squadron successfully parachuted 54 personnel from the British 22nd Special Air Service Regiment into a remote area near the Malaya-Thailand border.

[18] Supporting the Australian units in Korea placed heavy demands on the RAAF's transport force, which was too small to fully meet its domestic and international responsibilities, and it became increasingly difficult to sustain the four Dakotas in Malaya during 1952.

The squadron did not conduct proper conversion courses, and new Dakota pilots received only ad-hoc instruction on the type while serving as the co-pilot during operational tasks.

In November that year, it was renamed the Transport Training Squadron and became responsible for instructing new Dakota crews and RAAF air movements personnel.

[10][21] On 1 July 1964, one of the squadron's Caribous suffered severe damage when it made a crash landing at HMAS Albatross; this aircraft was subsequently written off and its fuselage used for training purposes by the Army's 1st Commando Regiment.

[29][30] One of the detachment's tasks was to give Caribou pilots experience in tropical and mountainous conditions, and all aircraft captains were required to complete at least one two-month deployment to Port Moresby before serving with No.

38 Squadron undertook transport flights in and around Australia, taking part when required in relief efforts following natural disasters.

38 Squadron Caribou was assigned to transport Red Cross supplies and personnel from Darwin to East Timor after a civil war broke out in that country.

[21][33] Detachment A was no longer required after Papua New Guinea achieved independence from Australia and established its own defence force, and the unit was disbanded on 17 January 1976.

[35] The last of these crashes caused the deaths of 25 aircrew and passengers, making it the RAAF's worst peacetime disaster; 21 of the people killed were high school students returning from an army cadet camp.

86 Wing Detachment C, were stationed in East Timor and supported the international peacekeeping force which had been deployed there to end the violence that had broken out following a successful referendum on independence conducted in August 1999.

[44] Despite the age of the Caribous and shortages of spare parts, Detachment C's ground crew managed to maintain a high aircraft serviceability rate.

[49] By the late 2000s the Caribous were becoming difficult to maintain, and were no longer capable of operating in war zones as they lacked electronic warfare systems and other forms of self-protection.

As a result, it was decided in late 2008 to retire the aircraft and replace them with Beechcraft King Air 350s on an interim basis until another tactical transport entered service.

[50] The Caribous were gradually retired from May 2009, the last leaving service on 27 November that year when A4-140 was flown to Canberra and handed over to the Australian War Memorial for preservation.

38 Squadron's King Airs were initially operated by Army personnel, who were given the choice of transferring to the RAAF or converting to helicopters at the end of their posting.

[62][63] As part of its budget for the 2016–17 financial year, the Australian Government announced that Intelligence, Surveillance, Target Acquisition, Reconnaissance, Electronic Warfare equipment would be acquired for three of No.

[73] As of 2018, the squadron's Intelligence, Surveillance, Target Acquisition, Reconnaissance, Electronic Warfare capabilities were classified, but were reported to include a communications relay function.