The first nineteen vehicles were in April 1937 taken into service by 6e Cuirassiers.
At the outbreak of the Second World War 218 vehicles were fielded with eleven squadrons.
In the spring of 1940, 21e Escadron d'AMD 35 was first destined for Finland and the Winter War but then sent to Narvik to assist Norway during Weserübung. It was in fact the renamed 4e GRDI (that would be replaced by a new unit of the same name in its former parent 15th Mechanised Infantry Division on 5 May) and was equipped with thirteen Panhard 178s.
During the Battle of France from 10 May 1940, on which date about 370 completed vehicles were available, the Panhard 178s were allocated to reconnaissance units of the mechanised and motorised forces. At the time the Panhard 178 represented one of the best armoured cars in its class in the world.
The three armoured divisions of the Cavalry, the Divisions Légères Mécaniques, had a nominal organic strength of forty armoured cars, plus four radio vehicles and an organic matériel reserve of four vehicles. This would make for a total of 144 in these mechanised light divisions. The Light (i.e. motorised) Divisions of the Cavalry, the Divisions Légères de Cavalerie, had a squadron of twelve Panhards plus a radio car and a matériel reserve of four in their Régiment de Automitrailleuses (RAM). The total in the Cavalry Light Divisions would thus be 85.
Not only the Cavalry but the Infantry also employed the type, in the GRDIs or Groupes de Reconnaissance de Division d'Infanterie, the reconnaissance units of the Divisions d'Infanterie Mécaniques, that despite their name were largely motorised infantry divisions. These were 1er GRDI for 5e DIM, 2e GRDI for 9e DIM, 3e GRDI for 12e DIM, 4e GRDI for 15e DIM, 5e GRDI for 25e DIM, 6e GRDI for 3e DIM and 7e GRDI for 1e DIM. Their organisation was basically identical to the units of the DLCs, but the strength was sixteen, making for a total of 112 vehicles.
The actual strength of above units might differ, but if all were on strength 24 vehicles were present in the matériel reserve or used for driver training, as apart from colonial vehicles, exactly 378 exemplars had been delivered on 10 May 1940.
After the start of the invasion several emergency ad hoc units were formed; these included the 32e GRDI for the regular 43e DI, having five Panhards. The 4e DCR, the armoured division of the Infantry hastily assembled in May, got 43 Panhard 178s.
The DLMs used their Panhard units for strategic reconnaissance. In the case of 1DLM this entailed a movement well in advance of the main body of the division as it was supposed to maintain a connection with the Dutch Army during the Battle of the Netherlands. Within 32 hours the armoured cars of the group Lestoquoi covered a distance of over 200 kilometres reaching the environment of 's-Hertogenbosch in the afternoon of 11 May. After some successful skirmishes with German armoured cars belonging to the reconnaissance platoons of the German Infanterie Divisionen, they withdrew, as the Dutch were already in full retreat. They were asked by the Dutch to assist an infantry attack on the southern bridgehead of the strategic Moerdijk bridges, held by German paratroopers. As the cars were not suitable for such a task the commander hesitated after incorrectly concluding the bridgehead was strongly defended. While thus being immobile, this group of Panhards was surprised in open polder landscape by a Stuka-attack with one vehicle disabled and quickly withdrew to the south.
The other two DLMs hurried forward to stop the advance of 3 and 4PD after the surprisingly swift fall of Fort Eben-Emael, their Panhards fighting a successful delaying battle against their German counterparts until the Battle of Hannut, the largest tank battle of the campaign. In general they had little trouble in dispatching with the lightly armoured German armoured cars, whose 20 mm main armament was not very effective against the Panhard frontal armour.
As the type was well-suited to German tactics, at least 190 Panhards, most of them brand-new, were issued to German reconnaissance units for use in Operation Barbarossa in 1941 under the designation of Panzerspähwagen P204 (f); 107 would be lost that year. Among these were some radio vehicles, designated Panzerspähwagen (Funk) P204 (f). Thirty Panhards were listed as in use on the Eastern Front on 31 May 1943. Some of these were fitted with spaced armour.
After the liberation of France, the 1e Groupement Mobile de Reconnaissance would, among a bewildering variety of types, also use some Panhard 178s, some of these modified.