As postwar negotiations between the Nationalist government in Nanjing and the Communist Party failed, the civil war between these two parties resumed. This stage of war is referred to in mainland China and Communist historiography as the "War of Liberation". On 20 July 1946, Chiang Kai-shek launched a large-scale assault on Communist territory in North China with 113 brigades (a total of 1.6 million troops). This marked the first stage of the final phase in the Chinese Civil War.

Knowing their disadvantages in manpower and equipment, the CCP executed a "passive defense" strategy. It avoided the strong points of the KMT army and was prepared to abandon territory in order to preserve its forces. In most cases the surrounding countryside and small towns had come under Communist influence long before the cities. The CCP also attempted to wear out the KMT forces as much as possible. This tactic seemed to be successful; after a year, the power balance became more favorable to the CCP. They wiped out 1.12 million KMT troops, while their strength grew to about two million men.

In March 1947 the KMT achieved a symbolic victory by seizing the CCP capital of Yan'an. The Communists counterattacked soon afterwards; on 30 June 1947 CCP troops crossed the Yellow River and moved to the Dabie Mountains area, restored and developed the Central Plain. At the same time, Communist forces also began to counterattack in Northeastern China, North China and East China.