Japanese soldiers who were protecting the railway line at Mukden blamed the Chinese for causing it. They rushed over to a Chinese garrison nearby and attacked it. Hostilities accelerated, and a battle broke out in 1931. This led to the invasion of Manchuria and the setting up of a puppet state there.

At that time, Chiang was in north-central China in the city of Xi'an with his National Revolutionary Army, and they were in the process of expelling the Communists. Chiang Kai-shek met with two of his generals, Yang Hucheng and Zhang Xueliang. Both men wanted Chiang to cease his hostilities against the Chinese Communists and had the great Chiang Kai-shek arrested. This was an outrageous act of betrayal.

Chiang's wife, Soong May-ling, was politically astute and often advised her husband upon Chinese affairs. After hearing of Chiang's kidnapping in Xi'an, she advised him to shift his focus away from his obsession with the elimination of the Communist Party of China and turn his attention to the very serious Japanese threat. During negotiations with his captors, she advised Chiang to accept their terms, which were the cessation of hostilities between the Chinese Communists and to unite the Communist troops with the National Revolutionary Army forces in order to expel Japan from Manchuria and China. Once he agreed to those terms, Chiang was released, and he joined up with the Communist leader, Zhou Enlai.