The regiment was raised in 1759. It served with distinction throughout the Peninsular War, from Talavera to Toulouse, during the greater part of which time it was attached to the Light Division. Subsequently, it fought at Quatre Bras and at Waterloo, where it lost heavily. It was the first Lancer regiment to serve in India, and the first British Lancers to use the lance in action. During a tour of service in India extending over a quarter of a century it won great fame on many fields. At the battle of Aliwal (where Sir Harry Smith, with a force of 12,000 men with 32 guns, defeated 19,000 Sikhs with 68 guns) it specially distinguished itself.

The 16th Lancers, being the only Lancer corps wearing the scarlet tunic, received the sobriquet of the "Scarlet Lancers."