In 1919, Douglas left the military to become a test pilot with the Handley Page Aircraft Company. He was dissatisfied with civilian life and returned to the Royal Air Force (RAF) in 1920 as a squadron commander. He attended the Imperial Defense College. In 1936, Douglas was named director of staff studies at the Air Ministry; he was the only fighter pilot on the senior staff. Advanced to air vice marshal, in 1938 he became assistant chief of the air staff with responsibility for training.
Douglas was a leading critic of the tactics employed by head of Fighter Command Air Chief Marshal Hugh Dowding. On 25 November 1940, Douglas succeeded Dowding as head of Fighter Command as air marshal. Among his innovations was the Big Wing concept of large formations of fighters employed in massive sweeps. He also encouraged development of night-fighting equipment and techniques. Although his new tactics enjoyed some success, critics complained that they left much of the British homeland unprotected.
In December 1942, Douglas was promoted to air chief marshal and assigned to the Middle East Air Force (MEAF) as deputy to Air Marshal Arthur Tedder. With the reorganization of Allied air forces in April 1943, Douglas assumed command of the MEAF. During the June 1944 Allied landings in Normandy, Douglas was chief of Coastal Command and commander of British Expeditionary Air Force with the mission of securing control of the English Channel.
With the return of peace, Douglas commanded the British Air Forces of Occupation and was knighted. Promoted to marshal of the RAF, in June 1946 he followed Field Marshal Bernard Montgomery as commander of British forces in Europe and military governor of the British occupation zone in Germany.
Douglas retired from active duty in 1948 and was awarded a peerage as First Baron Douglas of Kirtleside. He assumed a seat in the House of Lords and served on the boards of the two British state airlines. After completing two autobiographies, William Sholto Douglas died in Northampton on 29 October 1969.
Douglas, William Sholto, with Robert Wright. Sholto Douglas—Combat and Command: The Story of an Airman in Two World Wars. New York: Simon and Schuster, 1966.; Oliver, David. RAF Fighter Command. London: Trafalgar Square Publishers, 2000.; Richards, Denis, and Hilary St. George Saunders. The Royal Air Force, 1939–1945. Rev. ed. 3 vols. London: Her Majesty's Stationery Office, 1974–1975.