The 111th Observation Squadron was mustered into service June 29, 1923, together with the 111th Photo Section and the 171st Air Intelligence Section. The 171st Air Intelligence Section was mustered out of service on June 30, 1925. On March 20, 1924, the Medical Department Detachment was mustered into service and attached to the 36th Division Aviation.

The first commanding officer of the 36th Division Aviation was Major Bernard A. Law, who commanded the organization until December, 1925. First Lieutenant Edward V. Harbeck, U. S. Army Air Corps, was assigned as instructor of this unit in July, 1923. First Lieutenant Walter H. Reid, U. S. Army Air Corps, succeeded Lieutenant Harbeck as instructor, serving in that capacity solely until the year 1926 when he was given the rank in the National Guard as a Major, serving as both instructor and commanding officer until June, 1931. First Lieutenant Thomas W. Blackburn, U. S. Air Corps, succeeded Major Reid both as instructor and commanding officer in June, 1931, also being given the National Guard rank as Major and serving until June, 1935. Captain Harry Weddington succeeded Major Blackburn as instructor and commanding officer in July, 1935, and served until September, 1939. He also received the National Guard rank of Major. In September, 1939, Captain Charles C. Scott, commander of Flight A, 111th Observation Squadron, 36th Division Aviation, was advanced to the rank of Major and placed in command of the unit. Major Scott is the first National Guard officer to command the unit since the departure of Major Law in December, 1926. On July 1, 1939, Captain Charles W. Lawrence, U. S. Air Corps, reported for duty as instructor.

The 36th Division Aviation was mustered into service in the old Houston Light Guard Armory, Texas and Fannin Streets, Houston, Texas. Until September, 1923, the unit was without airplanes and devoted its time to drills and classes in the Houston City Auditorium. In September, 1923, the unit moved to Ellington Field, a military reservation, 18 miles southeast of Houston. During the World War, Ellington Field, embracing nearly 2,000 acres, was used as a training field by the United States Army. In September, 1923, the unit received its first airplanes, JN4H's. These planes were the old Curtis type with single ailerons and 150 H. P. Hisso motors. Later, JN6H's, with double ailerons and 180 H. P. Hisso motors, were used. It was a red-letter day when the unit received a Vought. Next to show up were the T. W. 3's, two passenger single seaters, then two 0-17's, followed by eight Douglas O-2H's, then the Douglas 0-43's and last the North American 0-47's. In December, 1928, the unit moved to the Houston Municipal Airport, where it was quartered until August, 1939. A 99-year lease to 35 acres of ground located in the southwest corner of the Municipal Airport was 'received from the city. In August, 1939, the unit moved to its own reservation, where a modern hangar, administration building and other improvements have been installed at a cost exceeding $250,000.