Ordered on 28 May 1940, the U-boat was laid down on 15 January 1941 at the DeSchiMAGAG Weser yard in Bremen as yard number 1019, launched on 18 November, and commissioned on 7 March 1942, under the command of Korvettenkapitän Ernst Sobe.
U-178 sailed from Kiel on 8 September 1942 into the Atlantic, passing north of Scotland and then turned southwest through the gap between Iceland and the Faroe Islands. She headed south for the waters around Cape Town. She made her only kill on 8 October, sinking the unescorted SS City of Athens. All but one of the 99 crewmen survived. The survivors managed to recover a cat from the wreckage after the sinking.
The boat was sunk by depth charges from the British destroyer HMS Active west southwest of Cape Town in South Africa on 8 October 1942. Sixty-one men died, there were no survivors.