On 1 October 1942, Neidholdt was promoted to major general and appointed commander of the new 369th (Croatian) Infantry Division, a legionary unit composed of volunteers from the Independent State of Croatia under German cadres, based in Yugoslavia. The Division began formation in Stockerau, Austria with the survivors of the 369th Croatian Reinforced Infantry Regiment and new volunteers from Croatia, it adopted the nickname of "Devil's Division", in honour of the 42nd Home Guard Infantry Division of the World War I Austro-Hungarian Army. The division was deployed in the Balkans against Yugoslav partisans at the beginning of 1943 instead of the Eastern Front as originally intended. Under Fritz Neidholdt's command the division took part in Case White (also known as the Fourth Axis Offensive) in northern Bosnia where, inexperienced in guerrilla warfare, it became notorious for its extreme brutality. The division then took part in Case Black in Northern Montenegro and southern Bosnia, where it reported the largest number of casualties of all the units engaged.