In 1949, the three western occupation zones (American, British, and French) were combined into the Federal Republic of Germany (FRG, West Germany). The government was formed under Chancellor Konrad Adenauer and his conservative CDU/CSU coalition. The CDU/CSU was in power during most of the period since 1949. The capital was Bonn until it was moved to Berlin in 1990. In 1990, FRG absorbed East Germany and gained full sovereignty over Berlin. At all points West Germany was much larger and richer than East Germany, which became a dictatorship under the control of the Communist Party and was closely monitored by Moscow. Germany, especially Berlin, was a cockpit of the Cold War, with NATO and the Warsaw Pact assembling major military forces in west and east. However, there was never any combat.

West Germany enjoyed prolonged economic growth beginning in the early 1950s (Wirtschaftswunder or "Economic Miracle"). Industrial production doubled from 1950 to 1957, and gross national product grew at a rate of 9 or 10% per year, providing the engine for economic growth of all of Western Europe. Labor unions supported the new policies with postponed wage increases, minimized strikes, support for technological modernization, and a policy of co-determination (Mitbestimmung), which involved a satisfactory grievance resolution system as well as requiring representation of workers on the boards of large corporations. The recovery was accelerated by the currency reform of June 1948, U.S. gifts of $1.4 billion as part of the Marshall Plan, the breaking down of old trade barriers and traditional practices, and the opening of the global market. West Germany gained legitimacy and respect, as it shed the horrible reputation Germany had gained under the Nazis.

West Germany played a central role in the creation of European cooperation; it joined NATO in 1955 and was a founding member of the European Economic Community in 1958.