David Marshall became Singapore's first Chief Minister, leading an unstable government that faced social unrest, exemplified by events like the Hock Lee bus riots. In 1956, he led negotiations in London for full self-rule, but the talks failed due to British security concerns, leading to his resignation. His successor, Lim Yew Hock, took a hard stance against communist and leftist groups, paving the way for the British to grant Singapore full internal self-governance in 1958.

In the 1959 elections, the People's Action Party (PAP), led by Lee Kuan Yew, emerged victorious, and Lee became the first Prime Minister of Singapore. His government faced initial skepticism due to the party's pro-communist faction, leading to business relocations to Kuala Lumpur. However, under Lee's leadership, Singapore saw economic growth, educational reforms, and an aggressive public housing program. The government also took measures to curb labor unrest and promote the English language.

Despite these achievements, PAP leaders believed Singapore's future lay with a merger with Malaya. The idea was fraught with challenges, particularly opposition from pro-communists within the PAP and concerns from Malaya's United Malays National Organisation about the balance of racial power. However, the prospect of a communist takeover in Singapore shifted sentiments in favor of the merger. In 1961, Malaya's Prime Minister, Tunku Abdul Rahman, proposed a Federation of Malaysia, which would include Malaya, Singapore, Brunei, North Borneo, and Sarawak. A subsequent referendum in Singapore in 1962 showed strong support for the merger under specific terms of autonomy.