The third vehicle in the development series, the Aust. C, was yet another attempt to improve the design of the suspension.

The Ausf. C still had eight road wheels on each side, with the first and last pairs on a short leaf spring, mounted parallel to the ground. The second and third pairs were supported by a longer leaf-spring assembly. Also featured were a servo-operated epicyclic clutch, brake steering and a new design for the drive sprocket and idler.

By 20 January 1938 there were only twenty-three Pz.Kpfw.III in the total Army Inventory. But this number had increased to forty-two by the end of March 1938. The Ausf. C saw action only in Poland. It was withdrawn from Panzer regiments in February 1940, before the start of the campaign in the West.