HMS Penelope was launched on 17 August 1962 and commissioned on 31 October 1963. She was initially intended to be Coventry, and before that Panther.

On commissioning, Penelope joined the 20th Frigate Squadron. In 1968, Penelope assisted in the aftermath of the Aer Lingus Flight crash in the Irish Sea. There has been a number of conspiracy theories about the crash, including the alleged involvement of Penelope. A theory suggests that, while performing tests, mistook the aircraft for a target drone and shot her down. It is difficult to apply any credence to this theory when considering the physical size of the aircraft, the flight profile, height and speed at which it was flying - beyond the stated engagement range of a Seacat system - and the fact that at this time HMS Penelope was a trials ship, not a front-line unit, and therefore unlikely to have had any 'war-load' Seacat missiles aboard at the time.  All conspiracy theories have been refuted by MOD

In 1982, Penelope took part in the Falklands War but did not reach the area of operations until 26 May. Upon her arrival, Penelope mainly performed escort duties, including escorting the damaged HMS Argonaut, who had suffered damage after being hit by cannon fire and bombs.

On 13 June, Penelope‍ '​s Lynx helicopter struck the already stranded Argentinian patrol boat Rio Iguazu with a Sea Skua missile. Penelope returned home in September 1982.

Soon after, Penelope undertook a Falklands patrol in the tense aftermath of the war, and did not return home until June 1983. The following year, she deployed to the South Atlantic again, patrolling and performing other duties in that region. 

Penelope was decommissioned and subsequently sold, along with HMS's Danae to Ecuador.