Much like Japan and Germany, the aftermath of World War II left Italy with a destroyed economy, a divided society, and anger against the monarchy for its endorsement of the Fascist regime for the previous twenty years. These frustrations contributed to a revival of the Italian republican movement. Following Victor Emmanuel III's abdication, his son, the new king Umberto II, was pressured by the threat of another civil war to call a Constitutional Referendum to decide whether Italy should remain a monarchy or become a republic. On 2 June 1946, the republican side won 54% of the vote and Italy officially became a republic. All male members of the House of Savoy were barred from entering Italy, a ban which was only repealed in 2002.

Under the Treaty of Peace with Italy, 1947, Istria, Kvarner, most of the Julian March as well as the Dalmatian city of Zara was annexed by Yugoslavia causing the Istrian-Dalmatian exodus, which led to the emigration of between 230,000 and 350,000 local ethnic Italians (Istrian Italians and Dalmatian Italians), the others being ethnic Slovenians, ethnic Croatians, and ethnic Istro-Romanians, choosing to maintain Italian citizenship.

The General Elections of 1946, held at the same time as the Constitutional Referendum, elected 556 members of a Constituent Assembly, of which 207 were Christian Democrats, 115 Socialists and 104 Communists. A new constitution was approved, setting up a parliamentary democracy. In 1947, under American pressure, the communists were expelled from the government. The Italian general election, 1948 saw a landslide victory for Christian Democrats, that dominated the system for the following forty years.