Douglas proposed a number of modifications designed to improve the performance of the B-18. Initially considered a redesign, the XB-22 featured 1,600 hp Wright R-2600-1 Twin Cyclone radial engines. The complete B-18 redesign was considered promising enough by the USAAC to alter the original contract to produce the last 38 B-18As ordered under Contract AC9977 as the B-23. The design incorporated a larger wingspan with a wing design very similar to that of the Douglas DC-3, a fully retractable undercarriage, and improved defensive armament. Notably, the B-23 was the first operational US bomber equipped with a glazed tail gun position. The tail gun mounted a .50 caliber machine gun, which was fired from the prone position by a gunner using a telescopic sight. 
The first B-23 flew on July 27, 1939 with the production series of 38 B-23s manufactured between July 1939 and September 1940.
While significantly faster and better armed than the B-18, the B-23 was not comparable to newer medium bombers like the North American B-25 Mitchell and Martin B-26 Marauder. For this reason, the 38 B-23s built were never used in combat overseas, although for a brief period, they were employed as patrol aircraft stationed on the west coast of the United States. The B-23s were primarily relegated to training duties although 18 of the type were converted as transports and redesignated as the UC-67. The B-23 also served as a testbed for new engines and systems.
After World War II, many examples were used as executive transports with appropriate internal modifications and as a result a large number have survived. Howard Hughes (among others) used converted B-23s as personal aircraft.
^Baugher, Joe. "B-23 'Dragon'."Joe Baugher's Encyclopedia of American aircraft, 23 November 2000. Retrieved: 12 June 2010.
Mondey, David. The Hamlyn Concise Guide to American Aircraft of World War II. London: Hamlyn Publishing Group Ltd., 2002, (republished 1996 by the Chancellor Press), First edition 1982. ISBN 1-85152-706-0.