He stayed in the army and attended the Staff College, Camberley from 1930 to 1931, alongside fellow students such as George Symes, George Hopkinson, William Gott and Miles Dempsey. He was promoted to brevet lieutenant colonel on 1 July 1936 and transferred to the Sherwood Foresters and was made a lieutenant colonel on 14 October 1937. Steele commanded the 1st Battalion, Sherwood Foresters from 1937 to 1939: the battalion was deployed to Jamaica in 1937 and to Palestine during the Arab revolt in Palestine in 1939. Returning to England, he was promoted to colonel on 27 June 1939 and made Assistant Adjutant-General at the War Office on the same date.