Following the loss of the heavy cruiser HMAS Canberra on 9 August 1942 in the Battle of Savo Island, the British Government approved the transfer of Shropshire to the Royal Australian Navy as a replacement. The transfer was announced in the House of Commons on 8 September 1942 by the Prime Minister, Mr Winston Churchill.
'His Majesty's Government consider that the Commonwealth should not bear this grievous loss following the sinking of other gallant Australian ships. We have therefore decided to offer, freely and unconditionally, to transfer His Majesty's 8-inch gun cruiser SHROPSHIRE to the Commonwealth Government, this offer has been most warmly received.'
The decision to transfer Shropshire to the Royal Australian Navy brought her recall from service on the South Atlantic Station. Captain J.T. Borrett OBE RN relinquished his command at Chatham on 23 December 1942, and five days later CMDR David H. Harries RAN assumed command to supervise refit and transfer to the Royal Australian Navy. At this stage in her history Shropshire had steamed some 363,000 miles of which 220,000 had been on war service. During the refit the ship's aircraft and catapult were landed. She did not carry an aircraft during her Australian service.
CAPT John A. Collins CB RAN assumed command on 7 April 1943 and she commissioned as HMAS Shropshire at Chatham on 20 April 1943. However, the pre transfer refit occupied many months and it was not until 25 June 1943 that Shropshire was formally handed over to the Royal Australian Navy by Admiral Sir George d'Oyly Lyon KCB, Commander-in-Chief, The Nore.
Most of the crew for HMAS Shropshire were former members of the HMAS Canberra Ships Company that had been in Action when Sunk at Savo Island.
In August 1943 Shropshire began her voyage to Australia escorting a Gibraltar bound convoy. She arrived at Capetown on 4 September, Fremantle three weeks later and finally Sydney on 2 October 1943. On 30 October at Brisbane the cruiser joined the Australian Squadron (Task Force 74) under the command of Rear Admiral Victor A.C. Crutchley VC RN, flying his flag in HMAS Australia
In December 1943 Shropshire took part in the New Britain operations covering the landings at Arawe and Cape Gloucester. In March 1944, with other ships of Task Force 74, she took part in the operations leading to the seizure of the Admiralty Islands and the following month was again in action at the Hollandia / Humboldt Bay operations.
Continuing support of the American northward sweep, she was at the Wakde / Sarmi / Biak operations in May 1944 before returning for a brief period to Sydney. On 12 July Shropshire proceeded to the Aitape (New Guinea) area operating in support of the 6th Army ashore and followed this duty with bombardment support for the landings at Cape Sansapor on 28 July.
In September 1944 the cruiser gave support to the landings on Morotai Island, prior to proceeding north as part of the invasion fleet for the Philippine operation at Leyte. She took part in the Battle of Surigao Strait on 25 October as part of Rear Admiral Oldendorf's force (Task Force 77) ending in the rout of the Japanese. In January 1945, after Leyte Gulf patrols, SHROPSHIRE took part in the assault on Lingayen, in the Philippines, before returning to Sydney in March for refit.
In June 1945 Shropshire was back in the operational area and after supporting the landings at Brunei, she was part of the force at the Balikpapan landings on 3 July. shropshire then returned to the Philippines and was there when the Japanese surrendered. She sailed for Tokyo Bay and was present for the surrender ceremony. She remained in Japanese waters until 17 November when the Broad Pendant of the Commodore Commanding Australian Squadron was transferred to HMAS Hobart and Shropshire departed for Sydney.
In May 1946 Shropshire left Australia for the United Kingdom, carrying the Australian Contingent for the Empire Victory celebrations, returning to Australia in August.
In January 1947 she became Squadron representative in Japanese waters, returning to Sydney in March 1947 in preparation for paying off, her days as an active warship ended. Since first commissioning in the Royal Australian Navy she had steamed 506,445.9 miles. The ship paid off into Special Reserve on 10 November 1949 after a number of periods in different Reserve categories.
After several years lying in Sydney Harbour, Shropshire was sold as scrap on 16 July 1954 to Thomas W. Ward Ltd, Sheffield, on behalf of the British Iron and Steel (Salvage) Corporation. On 9 October 1954 she left Sydney in tow of the Dutch tug OOSTZEE bound for the shipbreakers in Scotland. Shropshire was broken up at Troon and Dalmuir.