The outbreak of World War II on 1 September 1939 put Luxembourg's government in a delicate situation. On the one hand, the population's sympathy lay with Britain and France; on the other hand, due to the country's policy of neutrality since the Treaty of London in 1867, the government adopted a careful non-belligerent stance towards its neighbours. In accordance with the treaty's restrictions, the only military force Luxembourg maintained was its small Volunteer Corps under Captain Aloyse Jacoby, reinforced by the Grand Ducal Gendarmerie under Captain Maurice Stein. Together they formed the Corps des Gendarmes et Volontaires under Major-Commandant Émile Speller.
On 1 September Radio Luxembourg ceased broadcasting. Two weeks later the volunteer corps was bolstered by the addition of a 125-strong auxiliary unit. In the spring of 1940, fortifications were erected along the borders with Germany and France. The so-called Schuster Line, named after its constructor, consisted of concrete roadblocks and bridge blocks with steel doors. A series of nine radio outposts were established along the German border, each manned by gendarmes, with a central radio receiver in Captain Stein's official office near the volunteers' Saint-Esprit barracks in the capital. The official aim of these obstacles was to slow down the progress of any invading army and to give time for the guarantors of Luxembourg's neutrality to take counteraction against the invaders. However, compared to the massive power of the German forces, it was only symbolic but helped to calm the population.
After several false alarms in the spring of 1940, the probability of a military conflict between Germany and France grew. Germany stopped the export of coke for the Luxembourgish steel industry. Abwehr agents under Oskar Reile infiltrated the country, posing as tourists.
This was observed by Captain Fernand Archen, an undercover senior French intelligence officer in Luxembourg City, posing as a wine merchant. He reported his findings to his superiors at Longwy on 7 May, understanding that the agents were to be used to seize key bridges over the Sauer, Moselle and Our rivers. Luxembourg authorities also took notice, and Captain Stein worked to stop the Germans' activities.
On 3 March, the French Third Army was ordered to occupy Luxembourg in the event of a German attack.
On the afternoon of 9 May, a French intelligence officer stationed in Clervaux witnessed German troops preparing pontoon bridges in the Sauer. He attempted in vain to contact Captain Archen, and resorted to making a direct phone call to his superiors at Longwy.
Late that evening, the Grand Ducal government came into possession of a document from the German command. Dated 23 April 1940, it detailed plans for occupying strategic points within the country, and also laid out plans of action for Luxembourgish Nazis.
Luxembourg's border posts were put on full alert. The Grand Ducal Gendarmerie was mobilized to defend public buildings and to start arresting fifth columnists. Interned French pilots and German deserters were released. The economic councillor and the chancellor of the German legation were detained for questioning. It was alleged that they had used legation cars to organize subversive activities within the country, but since they still enjoyed diplomatic privilege, the police were forced to release them.
Captain Archen eventually received his subordinate's report, but by then he had been told by informants in the Gendarmerie that shots had been exchanged with German operatives at a remote farm near the Moselle. At 11:45 he radioed Longwy: "Reports of important German troop movements on the German-Luxembourg frontier." Throughout the night his messages became more and more frantic. Two Luxembourgish customs officials at Wormeldange heard horses and soldiers across the Moselle, but were unable to make out the Germans' activities due to a heavy fog.
At around midnight Captain Stein, Minister of Justice Victor Bodson, and Police Commissioner Joseph Michel Weis held an emergency meeting. Bodson requested that the capital be reinforced by gendarmes from the south, and told Weis to forward this information to the capital's district commissioner to give the necessary orders. Weis later tried to contact the district commissioner by phone, but failed to reach him; and reinforcements never came.
The steel doors of the Schuster Line were ordered closed on 10 May 1940 at 03:15, following reports of movement of German troops on the east side of the border rivers Our, Sauer, and Moselle. In the meantime, the Abwehr operatives and several German paramilitaries living in Luxembourg—the so-called Stoßtrupp Lützelburg—tried to sabotage the radio stations and the barricades along the German–Luxembourgish border, but their attempts were foiled by the Gendarmerie. They were, however, successful in interrupting the demolition of several bridges. The Royal Family was evacuated from their residence in Colmar-Berg to the Grand Ducal palace in Luxembourg City.
The German invasion began at 04:35 when the 1st, 2nd, and 10th Panzer Divisions crossed the border at Wallendorf-Pont, Vianden, and Echternach respectively. Wooden ramps were used to cross over the Schuster Line's tank traps. Fire was exchanged, but the Germans did not encounter any significant resistance save for some bridges destroyed and some land mines, since the majority of the Luxembourgish Volunteer Corps stayed in their barracks. The border was defended only by soldiers who had volunteered for guard duty, customs officials, and gendarmes. A handful of Germans secured the bridge at Wormeldange and captured the two customs officers there, who had demanded that they halt but refrained from opening fire. One by one the radio outposts fell. The partly demolished bridge over the Sauer at Echternach was quickly repaired by engineers of the Großdeutschland regiment, allowing the passage of the 10th Panzer Division. Planes flew overhead, heading for Belgium and France, though some stopped and landed troops within the country.
Captain Archen repeatedly alerted his superiors at Longwy of the invasion, but his reports never reached the 3rd Army at Metz. General Charles Condé, the army's commander, was unclear about the situation and at 05:30 dispatched aerial reconnaissance units to investigate. At 06:00 the French 3rd Light Cavalry Division was ordered to intervene.
Telephone and radio messages from the border posts to the Gendarmerie and Volunteer Corps headquarters informed the Luxembourgish government and Grand-Ducal court of the invasion. Foreign Minister Joseph Bech, in the presence of Prime Minister Pierre Dupong, attempted to contact the German ambassador at the legation and at his private residence, but they were informed that he was not present. At 06:30 the majority of the government, including Dupong and Bech, evacuated the capital by motorcade to the border town of Esch. Here a group of 125 German special operations troops had landed by Fieseler Storch, with orders to hold the area until the main invasion force arrived. A gendarme confronted the soldiers and asked that they leave, but he was taken prisoner. The government motorcade encountered a roadblock at a crossroads manned by German units, and was forced to detour through the countryside to avoid capture. French Ambassador Jean Tripier followed the government party but was stopped by the Germans and forced to return to the capital. Belgian Ambassador Kervyn de Meerendré was also stopped by German soldiers at the border and ordered to turn back.
Following consultation with her ministers, Grand Duchess Charlotte decided to abandon the palace. Accompanied by her husband, Prince Felix, her mother, Dowager Grand Duchess Marie Anne, and members of the Grand-Ducal suite, she departed for the border village of Redange. After a brief stop, her party crossed the border at 07:45. Meanwhile, Hereditary Grand Duke Jean and two of his sisters, accompanied by an Aide-de-camp, were to wait at the border for confirmation of occupation. Around 08:00 the prime minister and his entourage passed over the border before making contact with French troops at Longlaville. Last minute telephone calls with Luxembourg City revealed the capital to be completely surrounded.
Charlotte's party was able to link up with the government motorcade at Longwy. They were joined by the Hereditary Grand Duke at Sainte-Menehould. His party had been held up by the German troops near Esch, and they only escaped when their chauffeur drove straight through the soldiers.
At 08:00, elements of the French 3rd Light Cavalry Division (3 DLC) of General Petiet, supported by the 1st Spahi Brigade of Colonel Jouffault and the 2nd company of the 5th Armoured Battalion (5 BCC), crossed the southern border to conduct a probe of German forces; these units later retreated behind the Maginot Line. Five Spahis were killed. British and French planes bombed Bascharage, damaging the power grid. British Air Marshal Arthur Barratt, impatient with the reluctance of the French Air Force to conduct air strikes, ordered a flight of Fairey Battle bombers from the 226 Squadron to attack German tank columns. They went unescorted and encountered heavy anti-aircraft fire. Most were damaged by flak but managed to escape. One received a direct hit and crashed near Bettendorf. German soldiers pulled the three injured crew from the burning wreckage, one of whom later died in a local hospital.
The Grand Ducal Gendarmerie resisted the German troops, but to little avail; the capital city was occupied before noon. The Gendamerie chain of command in the south was thrown into disarray by the influx of refugees and the arrival of German and French troops. Most escorted refugees over the border, while some abandoned their posts and fled to France. Total Luxembourgish casualties amounted to six gendarmes and one soldier wounded. 22 soldiers (six officers and 16 non-commissioned officers) and 54 gendarmes were captured.
By the evening of 10 May 1940, most of the country, with the exception of the south, was occupied by German forces. More than 90,000 civilians fled from the canton of Esch-sur-Alzette as a consequence of the advance. 47,000 evacuated to France, 45,000 poured into the central and northern part of Luxembourg.
Grand Duchess Charlotte and the government of Premier Pierre Dupong fled to France, Portugal and the United Kingdom, before finally settling in Canada for the duration of the war. Charlotte, exiled in London, became an important symbol of national unity. Her eldest son and heir, Jean, volunteered for the British Army in 1942. The only official representative left behind was Albert Wehrer, head of the office of State Affairs, as well as the 41 deputies.