The 18th Panzer Division was formed on 26 October 1940 at Chemnitz from parts of the 4th Infantry Division, 14th Infantry Division, and four battalions of submersible tanks. They had originally been intended for Operation Sea Lion (Seelöwe), the planned German invasion of England. Of these four tank battalions, two formed the 18th Panzer Regiment and the other two the 28th Panzer Regiment of the 18th Panzer Division. In March 1941 the 18th Panzer Division was reorganized, the 28th Panzer Regiment was disbanded, one of its battalions became the third battalion of the 18th Panzer Regiment, the other battalion was transferred to the 3rd Panzer Division.
The 18th Panzer Division first saw action during the German invasion of Russia, Operation Barbarossa, on 22 June 1941. When the 18th Panzer Division crossed the Bug River underwater on 22 June, with submersible tanks, it marked the first time in World War II such vehicles were used in combat. The 18th Panzer Division fought as part of XLVII Panzer Corps, and over the next six months was involved in seizing Smolensk, Bryansk and the assault on Tula. However, like the rest of the German Army the 18th Panzer Division was unprepared for the Russian winter and was driven back to Oryol in January 1942 with heavy losses.
In the summer of 1942, the 18th Panzer Division took part in the initial drive on Stalingrad, but was transferred to the central section of the front. The 18th Panzer Division took part in defensive battles around Oryol in 1942-43, and in anti-partisan operations in the spring of 1943. In the summer of 1943 the 18th Panzer Division fought in the Battle of Kursk, and suffered heavy losses. After Kursk the 18th Panzer-Division was disbanded and the division's personnel were used to build the 18th Artillery Division.