Under the terms of the Japanese unconditional surrender dictated by the Allies, Japanese troops were to surrender to KMT troops but not to the CCP, which was present in some of the occupied areas. In Manchuria, however, where the KMT had no forces, the Japanese surrendered to the Soviet Union. Chiang Kai-shek reminded Japanese troops to remain at their posts to receive the KMT, but Communist forces soon began taking surrenders from the Japanese and fighting those who resisted.

The first post-war peace negotiation, attended by both Chiang Kai-shek and Mao Zedong, was in Chongqing from 28 August to 10 October 1945. Chiang entered the meeting at an advantage because he had recently signed a friendly treaty with the Soviet Union while the Communists were still forcing the Japanese to surrender in some places. Both sides stressed the importance of a peaceful reconstruction, but the conference did not produce any concrete results. Battles between the two sides continued even as peace negotiations were in progress, until the agreement was reached in January 1946. However, large campaigns and full-scale confrontations between the CCP and Chiang's troops were temporarily avoided.

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.

By late 1948, the CCP eventually captured the northern cities of Shenyang and Changchun and seized control of the Northeast after suffering numerous setbacks while trying to take the cities, with the decisive Liaoshen Campaign. The New 1st Army, regarded as the best KMT army, was forced to surrender after the CCP conducted a brutal six-month siege of Changchun that resulted in more than 150,000 civilian deaths from starvation.

In the campaigns in the northeast of China, the Nationalists suffered large losses. Chen Cheng cannot be blamed for the Nationalist failure because as early as 1946, he had already realized the situation in northeast China was impossible for the Nationalist and correctly suggested to abandon the region to free more troops, so that when the situation in other parts of China had improved, the salvaged troops could be used to retake the region. However, Chen Cheng's good suggestion was denied because it was simply impossible for Chiang Kai-shek and the nationalists to give up northeast China, one of the richest region in China, and they were infatuated with holding on to the land as long as possible, and gain more land as much as possible. This doctrine stretched the Nationalist troops thin and provided the excellent opportunity for the enemy to eliminate the Nationalist garrisons one at a time, and as Chen Cheng faithfully carried out Chiang's impossible task, the failure was inevitable

The capture of large KMT units provided the CCP with the tanks, heavy artillery and other combined-arms assets needed to execute offensive operations south of the Great Wall. By April 1948, the city of Luoyang fell, cutting the KMT army off from Xi'an. Following a fierce battle, the CCP captured Jinan and Shandong province on 24 September 1948. The Huaihai Campaign of late 1948 and early 1949 secured east-central China for the CCP. The outcome of these encounters were decisive for the military outcome of the civil war.

The Pingjin Campaign resulted in the Communist conquest of northern China. It lasted 64 days, from 21 November 1948 to 31 January 1949. The PLA suffered heavy casualties while securing Zhangjiakou, Tianjin along with its port and garrison at Dagu and Beiping. The CCP brought 890,000 troops from the northeast to oppose some 600,000 KMT troops. There were 40,000 CCP casualties at Zhangjiakou alone. They in turn killed, wounded or captured some 520,000 KMT during the campaign

On 1 October 1949, Mao Zedong proclaimed the founding of the People's Republic of China with its capital at Beiping, which was returned to the former name Beijing. Chiang Kai-shek and approximately two million Nationalist soldiers retreated from mainland China to the island of Taiwan in December after the PLA advanced into the Sichuan province. Isolated Nationalist pockets of resistance remained in the area, but the majority of the resistance collapsed after the fall of Chengdu on 10 December 1949, with some resistance continuing in the far south.

During the retreat of the Republic of China to Taiwan, KMT troops, who couldn't retreat to Taiwan, were left behind and allied with local bandits to fight a guerrilla war against the Communists. These KMT remnants were eliminated in the Campaign to Suppress Counterrevolutionaries and the Campaigns to Suppress Bandits.

In the end, the Communist military forces suffered 1.3 million combat casualties in the 1945–1949 phase of the war: 260,000 killed, 190,000 missing, and 850,000 wounded, discounting irregulars. Nationalist casualties in the same phase were recorded after the war by the PRC 5,452,700 regulars and 2,258,800 irregulars.