The Soviets were not fully satisfied with the Carden Loyd design and made a number of changes before putting it into mass production under the designation of T-27. Compared with the British original, the hull was larger, the running gear was improved and the weapon mount was modified to take a Soviet-built 7.62 mm DT machine gun. A number of other changes were made by Chief Engineer N. Kozyrev and Lead Engineer K. Sirken to improve the tankette's ability to cope with the Russian climate and terrain. It lacked any communication devices, as communication between vehicles was intended to be expedited through the use of signal flags.
The tankette was accepted into service on February 13, 1931. It was manufactured in two factories simultaneously, the Bolshevik factory in Leningrad and what would later become the GAZ factory in Nizhni Novgorod.
The principal use of the T-27 during its service life was as a reconnaissance vehicle. Initially, 65 tankette battalions were formed by the Red Army, with each having about 50 tankettes. This figure was later reduced to 23 per battalion. The tankette was also intended to be air-mobile. In 1935, the Soviets experimented with transporting T-27s by air, by suspending them under the fuselages of Tupolev TB-3 bombers.
The T-27 saw active service in the Soviet republics of Central Asia during the 1930s, where the tankettes were used in campaigns against rebellious native peoples. However, they fairly quickly became obsolete due to the introduction of more advanced tanks. The Red Army found them reliable and simple to operate, but the T-27 coped poorly with swampy and snowy terrain due to the narrowness of its tracks. It was also difficult to find crews, as the tankettes were so small that it was difficult to find crews of sufficiently diminutive stature. By the end of the 1930s the T-27 was relegated primarily to training use, with some being used as tractors to tow field guns.
Some experiments were also made to equip T-27s with more advanced weapons, such as flamethrowers and recoilless guns, but these did not prove successful. A few T-27s were pressurised and provided with special equipment to enable them to cross rivers underwater. It was also the first Soviet tracked vehicle transported by plane (a single tankette could be mounted below the fuselage of the TB-3 bomber).
2,157 T-27s remained in service by January 1941 and some took part in the initial stages of the Great Patriotic War (World War II) later that year. The last recorded combat use of the T-27 was in the Battle of Moscow in December 1941.