The post-war period
Italy was in chaos at the end of the war, with numerous resistance groups settling old scores, with weekly killings and assassinations. The political system was totally reorganized. Fascism was suppressed, and new parties emerged, especially the Christian Democrats led by Alcide de Gasperi (1881–1954), the Socialists led by Pietro Nenni, the Social Democrats led by Giuseppe Saragat, and the Communists led by Palmiro Togliatti (1893–1964). In June 1945, an all-party government was formed, headed by De Gasperi, and including the Communists. A referendum ended the monarchy in June 1946. Elections in 1946 elected 556 members of the Constituent Assembly, with 207 Christian Democrats, 115 Socialists, and 104 Communists. A new constitution was written, setting up a parliamentary democracy. The 1929 Concordat with the Vatican was continued, while Catholicism was not the official state religion anymore. From the Fascist era, the Republic retained the Institute for Industrial Reconstruction (IRI) and Eni, the national oil company which headed by Enrico Mattei, became a powerful economic force. In 1947 the communist were expelled from government. Economic chaos continued, with large-scale strikes in 1947. The Italian general election, 1948 set up the framework of government for the following 40 years: a blocked parliamentary system, with the Democrazia Cristiana always in government and the Italian Communist Party always in opposition; cabinets were very short (usually less than one year) and reshuffles involved the same politicians in different combinations. By 1950, the economy had largely stabilized, with the industrialized North far more prosperous than the Mezzogiorno (the rural South).
Under the Paris Peace Treaties of 1947, the eastern border area was annexed by Yugoslavia. In 1954, the Free Territory of Trieste was divided between Italy and Yugoslavia. In 1949, Italy joined NATO. The recovery of the Italian economy was helped through the Marshall Plan. Moreover, Italy was a founding member of the European Economic Community, which later transformed into the European Union (EU).

The economic boom
In 1950s and 1960s the country enjoyed prolonged economic growth, which was accompanied by a dramatic rise in the standard of living of ordinary Italians.
The Years of Lead
Main article: Years of lead (Italy)
Italy faced political instability in the 1970s, which ended in the 1980s. Known as the Years of Lead, this period was characterized by widespread social conflicts and terrorist acts carried out by extra-parliamentary movements. The assassination of the leader of the Christian Democracy (DC), Aldo Moro, led to the end of a "historic compromise" between the DC and the Communist Party (PCI). In the 1980s, for the first time, two governments were managed by a republican (Giovanni Spadolini 1981-82) and a socialist (Bettino Craxi 1983-87) rather than by a Christian-democrat.
At the end of the Lead years, the PCI gradually increased their votes thanks to Enrico Berlinguer. The Socialist party (PSI), led by Bettino Craxi, became more and more critical of the communists and of the Soviet Union; Craxi himself pushed in favour of US president Ronald Reagan's positioning of Pershing missiles in Italy.
In 2000, a Parliament Commission report from the Olive Tree left-of-centre coalition concluded that the strategy of tension had been supported by the United States to "stop the PCI, and to a certain degree also the PSI, from reaching executive power in the country". The report was not approved by the right-of-centre coalition. A source in the U.S. Embassy in Rome characterized the report as "allegations that have come up over the last 20 years" and have "absolutely nothing to them", while other commentators deemed it nothing more than "a manoeuvre dictated primarily by domestic political considerations".