Just over a month before the start of the war, Cardiff, under the command of Captain Michael Harris, had begun a six-month deployment to the Persian Gulf with the Armilla Patrol. Cardiff had relieved her sister ship and class lead Sheffield from this operational tasking, but was herself redeployed to the Falklands effort on 23 April. She sailed alone to Gibraltar and rendezvoused on 14 May with the Bristol group of British warships already heading south to the islands.
On 22 May, an Argentine reconnaissance Boeing 707, no. TC-92 of the Argentine Air Force's Grupo 1, De Transporte Aereo Escuadron II (Spanish for "2nd Air Transport Squadron, Group 1"), was fired on by Cardiff. The aircraft was detected while shadowing the Bristol group, and Cardiff was ordered to drop back and engage. The ship fired two Sea Darts at the aircraft at 11:40 (local time) from maximum range; the first fell short and second missed due to evasive manoeuvres taken by the aircraft's crew. After the attack, TC-92 dropped below radar level and returned to El Palomar. On 25 May, Cardiff was tasked with the recovery of four Special Air Service (SAS) troopers, who had parachuted from a C-130 Hercules passing over the destroyer.
The Bristol group met up with the main task force on 26 May. Cardiff's arrival allowed the damaged Glasgow to return to the United Kingdom for repairs. Cardiff's primary role was to form part of the anti-aircraft warfare picket, protecting British ships from air attack and attempting to ambush Argentine aircraft that were re-supplying Port Stanley Airport. She was also required to fire at enemy positions on the islands with her 4.5-inch gun. In one engagement she fired 277 high-explosive rounds.
Shortly after arrival, she was involved in the final Exocet raid against the aircraft carrier Invincible. In the early hours of 6 June, Cardiff shot down a friendly Army Air Corps Gazelle helicopter (no. XX377 of 656 Squadron), in the belief it was a low flying enemy C-130 Hercules. All four on board were killed, however a board of inquiry recommended that neither negligence nor blame should be attributed to any individual and that no action should be taken against any individual. Approximately an hour after the shoot down, Cardiff spotted four landing craft carrying troops from the 2nd Battalion, Scots Guards. Having been told there were no other British forces in the area, Cardiff's crew assumed they were Argentine, and fired illuminating star shells over them in preparation to attack. When the Guards saw the star shells and realised Cardiff's intentions, the officer in charge of the landing craft, Major Ewen Southby-Tailyour, moved them to shallow water in an attempt to outrun her. Cardiff, still closing on the craft, signalled to them a single word "friend" via Aldis lamp, Southby-Tailyour responded with "to which side". At this point Cardiff "left them alone", neither attacking or assisting them, nevertheless another "blue on blue" incident was avoided.
On the morning of 13 June, two Argentine Dagger aircraft attacked Cardiff's Lynx helicopter, no. 335 of 829 NAS, while it was searching in the Falkland Sound area. Poor weather had forced the Argentine craft to abandon their original mission of bombing Mount Longdon, and the third Dagger of their formation had suffered a mechanical failure and returned to base. The Lynx began evasive manoeuvres and dodged the attacks; the pilot, Lieutenant Christopher Clayton, was mentioned in despatches for his efforts.
Later that evening Cardiff shot down what would prove to be the last Argentine aircraft lost during the war, with a Sea Dart missile, Canberra bomber B-108 of Grupo de Bombardeo 2 ("Bombing Group 2") en route to bomb Port Harriet House. The pilot, Captain Pastrán, managed to eject but the navigator, Captain Casado, (whose ejection seat may have been damaged by the missile) was killed. The remains of Captain Casado were discovered in 1986, and identified by DNA testing in September 2008.
Argentina surrendered on 14 June, and Cardiff was required to accept the surrender of a 700-strong Argentine garrison in the settlement of Port Howard on West Falkland a day later. Five members of Cardiff's crew were used to man a captured Argentine patrol boat, renamed HMS Tiger Bay, in Stanley. Cardiff spent the rest of June acting as the Landing Area Air Warfare Controller (LAAWC) around San Carlos.
Over the course of the war, Cardiff fired nine Sea Dart missiles and one Mk 46 torpedo. She returned to the United Kingdom on 28 July 1982, having left the Falklands three weeks earlier along with Exeter and Yarmouth.