Created during the Second World War, 617 Squadron carried out the "bouncing bomb" raid to destroy dams in Nazi Germany.
It is arguably the most famous squadron in the RAF, with the original crew carrying drum-shaped bombs which bounced over water and exploded at the base of dam walls.
The squadron, based at RAF Lossiemouth in Moray, has twice been disbanded and reformed as it has moved from operating the Lancaster to the Vulcan to the Tornado, in a process that is usual for RAF squadrons.
The latest disbandment is part of the planned drawdown of the Tornado force, but 617 squadron are to reform, taking delivery of the Lightning II fighter to be based at RAF Marham in Norfolk with both RAF and Royal Navy personnel.
A flypast by an original Lancaster bomber was due to mark the disbandment today but was cancelled due to the weather. The squadron bade farewell to active service with a parade at the airbase and a royal salute in front of the watching Duke of York.
Officer Commanding 617 Squadron, Wing Commander David Arthurton, said: "The spirit and ethos of the Dambusters survives to this day and will go on.
"In 1943, 617 Squadron delivered weapons against the dams in Germany, while in recent times we have continued to use precision flying in Afghanistan, delivering close air support in the protection of troops on the ground.
"The good news is that the Dambusters will not be forgotten - they will reform in 2018 as the RAF's first Lightning II Squadron. It's a sad day, but seeing the current members of 617 Squadron lined up on the parade square was an exceptionally proud moment for me as their commanding officer."
The squadron completed its final mission as a Tornado unit in February after a six-month deployment to provide aerial reconnaissance for ground forces in Afghanistan.
There are about 175 personnel in 617, all of whom will now transfer to other Tornado squadrons, retrain on the Typhoon aircraft or move to another part of the organisation.
The squadron gained its epithet after its first raid, for which it was initially formed, to destroy dams in the Ruhr valley in Nazi Germany.
Today, RAF pilots fly at least 250ft (76m) above ground, but the original Dambusters flew at only 60ft (18m), often at night.