3 Squadron RAAF was first formed on 1 July 1925 at Point Cook under the command of Flight Lieutenant F. Barnes. One week later,.the Squadron moved to Richmond in New South Wales.

3 Squadron was still located at Richmond when WW2 broke out. The onset of war saw an increase in flying operations. After handing over its aircraft to other units, 3 Squadron RAAF sailed for Egypt on 15 July 1940. They arrived at Port Tewfik on 23 August 1940. The squadron was equipped with Lysanders and Gloster Gladiators. 

The squadron moved to many different airfields in various countries including Italy while they were overseas. They changed their aircraft from Gloster Gladiators to Hurricanes, then P-40 Tomahawks, followed by P-51 Mustangs. 

The German forces in Italy surrendered on 2 May 1945. With the end of the war in Europe 5 days later, 3 Squadron RAAF was eventually ordered to return to Australia. They set sail for Australia in September 1945. 

3 Squadron RAAF was disbanded at Point Cook in Victoria on 30 July 1946.