Design work started in 1932 to meet a requirement from the Finnish Air Force although they never accepted the type. It first flew in 1934 and began equipping the Czechoslovak Air Force the following year. The machine was made in two versions—with wheeled undercarriage for land use and with floats for water operations. Although Czechoslovakia was a land-locked nation, a floatplane target tug was necessary for a Czechoslovak anti-aircraft artillery training depot in the Bay of Kotor (now in Montenegro) and four were built as the Š-328v (v stood for vodní or water). It was used as a reconnaissance aircraft, light bomber and ground-attack aircraft for the Czechoslovakia Air Force during the mid- and late-1930s and in that same role during the early months of World War II, when the Slovak Air Force came under German control following its occupation of Czechoslovakia in March 1939. 13 planes from first production batch were tested as night fighters, armed with four 7,92 mm vz.30 machine guns in the wings and two movable vz.30s for the observer. These were later modified for normal use because without radar whose effectiveness was minimal. At the time of the Munich agreement, which ended the Sudeten crisis the Czechoslovak Air Force had 227 planes in operational units and 87 in training schools and mobilisation depots. Production continued even after German occupation of Czechoslovakia until 1940, the last planes being 30 Š-328 produced for Bulgaria, and 50 planes of that type ordered by Slovakia in July 1938. Altogether, 412 Letov Š-328 were produced.[1]
The Letov Š-328's combat record is vague but some sources suggest that some Š-328 landplanes may have been used during the Spanish Civil War[2] however there is no evidence to confirm this and is likely a misidentification of another type (probably Letov Š-231 of which 17 units were in service of the Republican air force).The Germans used captured Š-328s both as trainers and in the night attack role on the Eastern Front in the Winter of 1942–43. The Germans handed over some of these machines to their allies, Bulgaria, and Slovakia.
In early October 1939, Š-328s of the Second Czechoslovak Republic were used to attack Hungarian forces that had crossed into Ruthenia. Although the incursion was defeated, Czechoslovakia was forced to hand over much of Ruthenia to Hungary in the First Vienna Award. In March 1939, Germany occupied the remaining Czech part of Czechoslovakia, with Slovakia declaring independence. On 23 March 1939, Hungary invaded Slovakia, and in the brief Slovak–Hungarian War, Slovak Š-328s were used for reconnaissance and attack duties against the advancing Hungarian forces.
The Slovak Š-328s carried out reconnaissance and bombing sorties in support of the Slovak participation in the Invasion of Poland in September 1939. Following Slovakia's participation in the German Invasion of the Soviet Union in 1941, Slovak Š-328s were used for patrol and reconnaissance flights and a few of them also attacked soviet trucks and cars. They were again used in anti-partisan operations in western Ukraine in the summer of 1942. At least 11 Slovakian aircraft were seized by Slovak insurgents and flown against the Germans in late 1944 during the Slovak National Uprising in September to October 1944. The unit never had more than three aircraft operational at time, but they were an important asset. On 7 September 1944, this aircraft achieved one of the last downings of an enemy aircraft achieved by a biplane, when a patrolling Š-328 was attacked by a reconnaissance Focke-Wulf Fw 189. The Fw 189 was damaged by machine gun fire and forced to land in an area controlled by the insurgents.