Italy is a charter member of the North Atlantic Treaty Organization and the European Union. It joined the growing political and economic unification of Western Europe, including the introduction of the Euro in 1999.

A new constitution was written for the new republic, taking effect on January 1, 1948, while the desperate fascist Salo Republic attempt was crushed by the Allies in April 1945. The referendum at the origin of the Italian republic was, however, the object of deep discussion, mainly because of some contested results. Under the 1947 peace treaty, minor adjustments were made to Italy's frontier with France, the eastern border area was transferred to Yugoslavia, and the area around the city of Trieste was designated a free territory. In the 1950s, Italy became a member of the NATO alliance and an ally of the United States, which helped to revive the Italian economy through the Marshall Plan.

The following period came to be known as the anni di piombo ("lead years") because of a wave of bombings, attributed to far-right, far-left and secret services' actions. Piazza Fontana bombing in the centre of Milan, on December 12, 1969, marked the beginning of this violent period. The police arrested 4 000 people in left-wing circles, among whom Giuseppe Pinelli, an anarchist who was initially blamed for the bombing. In December 1970, a coup dubbed the Golpe Borghese failed. Christian Democrat (DC) politician Aldo Moro was kidnapped by the Red Brigades, a paramilitary group, on March 16, 1978, the day the historic compromise with the Italian Communist Party (PCI), which had embraced eurocommunism with Enrico Berlinguer, was supposed to be enacted, insuring the PCI's return to government for the first time since May 1947. Aldo Moro's corpse was then discovered on May 9, in via Caetani in Rome, in a site equidistant between the DC and the PCI headquarters.

In the 1980s, for the first time, two governments were led by a republican and a socialist (Bettino Craxi) rather than by a member of DC (which nonetheless remained the main force behind the government). From 1992 to 1997, Italy faced significant challenges as voters (disenchanted with past political paralysis, massive government debt, extensive corruption, and organized crime's considerable influence collectively called Tangentopoli after being uncovered by Mani pulite - "Clean hands") demanded political, economic, and ethical reforms. The 1994 elections also swept media magnate Silvio Berlusconi (leader of "Pole of Freedoms" coalition, which included Forza Italia, the regionalist far-right ‘‘Lega Nord’’ party and the far-right Alleanza Nazionale) into office as Prime Minister. However, his government collapsed after only a few months because the Northern League split out.

A technocratic cabinet led by Lamberto Dini, supported by the left-wing parties and the Northern League, lasted until Romano Prodi's new center-left coalition won the 1996 general election. In 2001 the center-right took the government and Berlusconi was able to remain in power for the complete five year mandate but having to pass through a crisis and a government's reshuffle. The elections in 2006 returned Prodi in the government with a slim majority, but Berlusconi won the 2008 elections and now the center-right coalition is back in power.