Köln was ordered as "Cruiser D" under the contract name Ersatz Arcona, as a replacement for the old cruiser Arcona. The keel for Köln was laid on August 7th 1926 at the Kriegsmarinewerft shipyard in Wilhelmshaven. She was launched on May 23rd 1928, and commissioned into the Reichsmarine on January 15th 1930, the last member of her class to be completed. She spent the year conducting sea trials and training in the Baltic Sea. In 1931, she was modified with dual 8.8 cm anti-aircraft guns to replace the original single mounts, the rear superstructure was enlarged, and a fire control system was installed aft. Köln departed on a cruise into the Atlantic in early 1932 for more extensive sea trials. After returning to Germany, she took on her first crew of naval cadets for a world cruise, departing Germany in late 1932. The tour lasted a full year; she stopped in ports across the globe, including in the Atlantic, Pacific, and Indian Oceans, and the Mediterranean Sea.
In 1935, the ship had an aircraft catapult installed, along with cranes to handle float planes. A pole mast was also installed on the rear side of the aft funnel. Köln continued to serve as a training ship until early 1936, when she was transferred to fishery protection duty. Later that year, she joined the non-intervention patrols off Spain during the Spanish Civil War. After the German heavy cruiser Deutschland was attacked by Republican bombers in the so-called "Deutschland incident", Köln transported wounded crew members from Deutschland back to Germany. Köln conducted a further four patrols off Spain before returning to fishery protection in the North Sea in 1938. Late in the year, she went into drydock for a refit in Kiel.