On the outbreak of the Second World War, Achilles started patrolling the west coast of South America looking for German merchant ships, but by 22nd October she had arrived at the Falkland Islands, where she was assigned to the South American Division under Commodore Harwood and allocated to Force G (HMS Exeter and HMS Cumberland). In the early morning of 13th December a force of Achilles, HMS Ajax and HMS Exeter detected smoke on the horizon, which was confirmed to be a pocket battleship, thought to be the Admiral Scheer, at 0616. A fierce battle ensued, at a range of approximately 20,000 yards/metres. Achilles took some damage, her captain, W.E. Parry RN being injured, but fortunately only four crew members were killed in the battle, compared to 36 of Graf Spee's crew killed. The range reduced to about 4 miles/7,000 yards/metres at around 0715, by the time Graf Spee broke off the engagement around 0745 to head for the neutral harbour of Montevideo which she entered at 2200 that night, having been followed by Achilles and Ajax all day.
Following the battle, Achilles returned to Auckland, New Zealand on 23 February 1940, where she was refitted until June. After Japan entered the war, she escorted troop convoys, then joined the ANZAC squadron in SW Pacific. While operating off New Georgia with U.S. forces, she was hit by a bomb on X turret on 5 January 1943. Repaired at Portsmouth from April 1943 to May 1944, during which X turret was replaced by 4-2 pdr. Sent to the Eastern Fleet, Achilles then joined Task Force 57 in May 1945 for final operations in the Pacific.
In September 1941 the New Zealand Division of the Royal Navy became the Royal New Zealand Navy.