The Do 17E and Do 17F gave way to the broadly similar Do 17M and Do 17P, which were bomber and reconnaissance variants respectively, differing from the earlier versions in being powered by 900 hp Bramo Fafnir 323A or BMW 132N radial engines in place of the inline DB600s originally fitted. These raised the maximum speed to fractionally above 300 mph. The DB600-powered versions remained in limited use at the beginning of the war, but by the Battle of France all had vanished from frontline service. On 10 May, 188 serviceable Do 17Ms and Do 17Ps were available, together with 338 examples of the further improved Do 17Z.
Production Do 17Zs featured more powerful (1,000 hp) Bramo 232P radial engines with two-stage superchargers, but more obviously had an entirely redesigned forward fuselage, much deeper, more extensively glazed, and with a huge underslung ventral gondola. This had first appeared on the Do 17S (built in pre-production form only) and made the aircraft look much more like a Ju 88. It raised the crew complement to five, though the bombload remained a paltry 22001b. Defensive armament was increased to six 7.9-mm machine guns, one fixed and one free-mounted firing forward, one firing aft in each of the dorsal and ventral positions, and two in the side windows. But these weapons were mounted singly, and had relatively limited arcs of fire. By comparison with the multi-gun powered turrets fitted to aircraft like the Wellington and Blenheim they represented little more than a last-ditch defence, although Do 17 gunners did down surprising numbers of RAF fighters which pressed their attacks too closely, or failed to break away aggressively enough. The Do 17U was basically a hybrid combining the new nose with the engines of the Do 17M. The 15 aircraft built were used as dedicated pathfinders by Kampfgrüppe 100, and carried a second radio operator.
The Dornier Do 17 was the least numerous of the Luftwaffe bombers deployed against Britain during the Battle, but has been claimed by some to have been the most effective. Most German military aircraft of the period were designed from the start as warplanes, but were first revealed in a civil guise - masquerading as airliners or 'high speed mailplanes'. For example, Dornier itself had built Do 11Cs in Switzerland as 'freight transports'. The Do 17, by contrast, was really designed as a high speed mailplane, with tiny cramped cabins fore and aft of the wing accommodating six passengers with very difficult access. This was realised too late, and the three prototypes were soon placed in storage, where they remained until discovered by a curious RLM test pilot, who flight-tested one and was so impressed by its performance that he suggested the type's conversion for use as a high-speed bomber.
Dornier were by then working on the long-range Do 19, a four-engined heavy bomber, and were not greatly interested in the idea. Nor, until the death of General Walther Wever, was the Luftwaffe. But Wever's successor as Chief of Staff, Albert Kesselring was a tactical man, through and through, and preferred large fleets of relatively cheap, lightweight bombers optimised for what was, in essence, a close support role. The Do 17 soon won his approval, while the Do 19 (probably the aircraft the Luftwaffe really needed for the Battle of Britain) was unceremoniously scrapped. Three further Do 17 prototypes were built with twin endplate fins in place of the original aircraft's single fin, and the forward fuselage was deepened and fitted with extensive glazing to accommodate a full bomber crew. The aircraft retained much of the appearance of the original, and this led to the type's 'Flying Pencil' nickname.
Aircraft losses suffered during the invasion of the Low Countries and France were not fully restored, while some units were already converting to the newer, faster and more effective Ju 88. Do 17 numbers dropped throughout the Battle of Britain. On 1 September 1940, the frontline bomber Kampfgrüppen had 158 Do 17Ms and 212 Do 172s on charge. These won a reputation for low level pinpoint bombing attacks, but also flew their share of medium level area attacks. The Do 17 was highly manoeuvrable, and its crews could dive at speeds which bordered on the unbelievable. If sufficient height were available, and the defending fighters low on fuel, Dorniers could sometimes escape by pushing their noses down and diving for home 'flat out' - much like the Ju 88. A final version of the 'Flying Pencil' in use during the Battle of Britain was the Do 215B, 18 of which were designed and built for export (to Sweden) but were then embargoed and re-directed to the Luftwaffe, which used them for reconnaissance duties.