No. 5 Squadron was formed at Shawbury in England on 15 June 1917, as a unit of the Australian Flying Corps, under the command of Captain Andrew Lang, and was initially known as "29 (Australian) (Training) Squadron" of the Royal Flying Corps. During August 1917, Major Henry Petre assumed command of the squadron. Its Australian Flying Corps designation ("No. 5 (Training) Squadron, AFC") was officially recognised in early 1918. Equipped with a variety of aircraft, including Maurice Farman Shorthorns, Airco DH.6, Avro 504s, Sopwith Pups, S.E.5as and Sopwith Camels, the squadron provided training to Australian pilots in Britain during World War I. After completing their training with No. 5 Squadron Australian pilots could be posted to one of the operational squadrons but to begin with the squadron's main role was to train pilots and observers for service in No. 1 Squadron in the Middle East. Later, when equipped with Camels, the squadron supplied pilots to 4 Squadron, Australian Flying Corps. During the war, the squadron graduated on average of eight pilots per month, who were trained by combat experienced pilots transferred from the operational squadrons. No. 5 Squadron was embarked to return to Australia in May 1919 and was for formally disbanded on reaching Australia the following month.
On 20 April 1936, No. 5 Squadron was re-formed at RAAF Base Richmond as a naval fleet co-operation squadron by expanding No. 101 (Fleet Co-Operation) Flight.