The 23rd Infantry Division was activated in the Panama Canal Zone on 2 December 1954. It acquired the lineage, heraldry, honors and traditions of the Americal Division of World War II. The division occupied a joint headquarters with HQ, U.S. Army Caribbean (USARCARIB) at Fort Amador, Canal Zone. The commander of USARCARIB also commanded the 23rd Infantry Division.

The mission of U.S. Army Caribbean was to “Keep the art of jungle warfare alive in the Army”. The 23rd Infantry Division supported USARCARIB in its mission as well as to protect the Panama Canal and the Caribbean Basin during the Cold War.

Principle infantry units of the division were the 33rd Infantry Regiment at Fort Kobbe, Panama Canal Zone; the 65th Infantry Regiment at Camp Losey, Puerto Rico, U.S. Army Forces Antilles, and Military District of Puerto Rico; and the 29th Infantry Regiment at Fort Benning, Georgia. The division did not serve in combat during this period.

The division was inactivated 10 April 1956 at Fort Amador, Canal Zone.