The task of modernizing the T-37 fell again to the design bureau of Zavod N°.37 in Moscow directed by N. Astrov with N. Kozyrev as the chief engineer.

The resulting tank had a partially welded, partially riveted housing; additional floats, as on the T-37 A, were not provided.
The tower of cylindrical form was displaced to the left.
The result was the T-38, lower and wider than the T-37 yielding better behaviour in water, but still using the proven GAZ-AA power train.
In some units, some T-38 tanks were improved by the addition of a 20mm ShVAK cannon in place of the usual DT machine-gun.

Production ceased in 1938, but.started again in 1939 with the improved T-38M, which used the power train and engine of the GAZ-M1.
In all, from 1936 until 1939 were finished 1340 T-38 of which an even lower proportion were fitted with radios than in theT-37, only 165.

In 1941 the T-38, together with the T-37A, served in the reconnaissance subdivisions of tank divisions and allmost all were lost by the end of this year.
However, the last combat employment of T-38 took place in 1944, when one battalion of these machines together with the battalion of the equally amphibian Ford GPA participated in fighting the Finnish Army at the Svir river.