The Liberal Democracy period in Indonesia was a period in Indonesian political history, when the country was under a liberal democracy system which began on 17 August 1950 following the dissolution of the federal United States of Indonesia less than a year after its formation, and ended with the imposition of martial law and President Sukarno's decree, which resulted in the introduction of the Guided Democracy period on 5 July 1959.

Following more than 4 years of brutal fighting and violence, the Indonesian National Revolution was over, with the Dutch–Indonesian Round Table Conference resulting in the transference of sovereignty to the United States of Indonesia (RIS). However, the RIS government lacked cohesion inside and was opposed by many republicans.

On August 17, 1950, the Republic of the United States of Indonesia (RIS), which was a form of state as a result of the Round Table Conference agreement and the recognition of sovereignty with the Netherlands, was officially dissolved. The government system was also changed to a parliamentary democracy and based on the Provisional Constitution of 1950.

However, divisions in Indonesian society began to appear. Regional differences in customs, morals, tradition, religion, the impact of Christianity and Marxism, and fears of Javanese political domination, all contributed to disunity. The new country was typified by poverty, low educational levels, and authoritarian traditions. Various separatist movements also arose to oppose the new Republic: the militant Darul Islam ('Islamic Domain') proclaimed an "Islamic State of Indonesia" and waged a guerrilla struggle against the Republic in West Java from 1948 to 1962; in Maluku, Ambonese, formerly of the Royal Netherlands East Indies Army, proclaimed an independent Republic of South Maluku; Permesta and PRRI rebels fought the Central government in Sulawesi and West Sumatra between 1955 and 1961.

The economy was in a disastrous state following three years of Japanese occupation and the following four years of war against the Dutch. In the hands of a young and inexperienced government, the economy was unable to boost production of food and other necessities to keep pace with the rapidly increasing population. Most of the population were illiterate, unskilled, and suffered from a dearth of management skills. Inflation was rampant, smuggling cost the central government much needed foreign exchange, and many of the plantations had been destroyed during the occupation and war.

The period of liberal democracy was marked by the growth of political parties and the enactment of a parliamentary system of government. The period saw the first free and fair elections in the country's history, as well as the first and only free and fair election until the 1999 legislative elections, which was held at the end of the New Order regime. The period also saw a long period of political instability, with governments falling one after another.^[70]