The first Lysanders entered service in June 1938, equipping squadrons for army co-operation and were initially used for message-dropping and artillery spotting. When war broke out in Europe, the earlier Mk Is had been largely replaced by Mk IIs, the older machines heading for the Middle East. Some of these aircraft, now designated type L.1, operated with the Chindits of the British Indian Army in the Burma Campaign of the Second World War.
Four regular squadrons equipped with Lysanders accompanied the British Expeditionary Force to France in October 1939, and were joined by a further squadron early in 1940. Following the German invasion of France and the low countries on 10 May 1940, the Lysanders were put into action as spotters and light bombers. In spite of occasional victories against German aircraft, they made very easy targets for the Luftwaffe even when escorted by Hurricanes. Withdrawn from France during the Dunkirk evacuation, they continued to fly supply-dropping missions to Allied forces from bases in England; on one mission to drop supplies to troops trapped at Calais, 14 of 16 Lysanders and Hawker Hectors that set out were lost. 118 Lysanders were lost in or over France and Belgium in May and June 1940, of a total of 175 deployed. With the fall of France, it was clear that the type was unsuitable for the coastal patrol and army co-operation role, being described by Air Marshal Arthur Barratt, commander-in-chief of the British Air Forces in France as "quite unsuited to the task; a faster, less vulnerable aircraft was required." Nevertheless, throughout the remainder of 1940, Lysanders flew dawn and dusk patrols off the coast and in the event of an invasion of Britain, they were tasked with attacking the landing beaches with light bombs and machine guns. They were replaced in the home-based army co-operation role from 1941 by camera-equipped fighters such as the Curtiss Tomahawk and North American Mustang carrying out reconnaissance operations, while light aircraft such as the Taylorcraft Auster were used to direct artillery. Some UK-based Lysanders went to work operating air-sea rescue, dropping dinghies to downed RAF aircrew in the English Channel. Fourteen squadrons and flights were formed for this role in 1940 and 1941.