After the First World War ended in November 1918, to jubilation and profound relief in Paris, unemployment surged, prices soared, and rationing continued. Parisian households were limited to 300 grams of bread per day, and meat only four days a week. A general strike paralyzed the city in July 1919. The Thiers wall, 19th-century fortifications surrounding the city, were demolished in the 1920s and replaced by tens of thousands of low-cost, seven-story public housing units, filled by low-income blue-collar workers. . Paris struggled to regain its old prosperity and gaiety.

The French economy boomed from 1921 until the Great Depression reached Paris in 1931. This period, called Les années folles or the "Crazy Years", saw Paris reestablished as a capital of art, music, literature and cinema. The artistic ferment and low prices attracted writers and artists from around the world, including Pablo Picasso, Salvador Dalí, Ernest Hemingway, James Joyce, and Josephine Baker.

Paris hosted the 1924 Olympic Games, major international expositions in 1925 and 1937, and the Colonial Exposition of 1931, all of which left a mark on Paris architecture and culture.

The worldwide Great Depression hit Paris in 1931, bringing hardships and a more somber mood. The population declined slightly from its all-time peak of 2.9 million in 1921 to 2.8 million in 1936. The arrondissements in the city's center lost as much as 20% of their population, while the outer neighborhoods, or banlieus, grew by 10%. The low birth rate of Parisians was made up by a wave of new immigration from Russia, Poland, Germany, eastern and central Europe, Italy, Portugal and Spain. Political tensions grew in Paris, as seen in strikes, demonstrations and confrontations between the Communists and Front populaire on the extreme left and the Action Française on the extreme right.