After World War I the Versailles Treaty limited the construction of new warships  in Germany. It was allowed to keep six old battleships of the Deutschland and Lothringen class, six small cruisers, 12 DDs and 12 torpedo boats.  According to Article 190 of the treaty, the battleships could be replaced 20 years after they were commissioned, but the replacement must not exceed 10000 tons.

Therefore, the first replacement was ordered in 1928, the Panzerschiff A which later got the names Deutschland and Lützow. The planing first went into two directions, a heavy armed and protected monitor for coastal defenses or a cruiser like ship with a larger range but less armor. Since France was the possible enemy in this days the second alternative was chosen to build a ship that could threaten  French merchant shipping. The concept of the new  Panzerschiffe was "faster than stronger enemies" (i.e. battleships except the British BC Hood, Renown and Repulse), "and stronger than faster enemies" (CAs and CLs), which was plausible in the days before the fast battleships.

In many ways, the Panzerschiffe introduced revolutionary techniques for ships of their size, they were Diesel powered to increase their operational range and hull was intensively welded to reduce weight. Although their official size was 10000 ts, their maximum displacement was about 50% higher.

All three Panzerschiffe, which were called "Westentaschen-Schlachtschiffe" - "Pocket Battleships" outside of Germany,  had the same basic design, their outer appearance was quite different, especially the design of the command tower.

All ships were used in the international sea patrols off the Spanish coast during the Spanish civil war and had different fates in World War II.
The Admiral Scheer made a six month combat mission in the South Atlantic and Indian Ocean which showed that the concept of a Diesel powered commerce raider did work, sinking over 100000 ts of Allied shipping.

In 1940 the two remaining Panzerschiffe (Deutschland/Lützow and Admiral Scheer ) were reclassified as Heavy Cruisers.