Almost immediately after their victory, the Allies began to quarrel among themselves. The Soviet Union began to establish Communist governments in the Eastern European countries its army had occupied at the end of the war. The Western powers tried to block Communist expansion in the areas under their control. The Soviets imposed barriers against communication, trade, and travel between East and West. Extreme mistrust and tension grew on each side, a condition that came to be called the Cold War.

The outbreak of the Cold War affected Germany immediately. When the Soviet Union and the Western Allies could not agree on a common policy in Germany, each side began to organize its own occupation zones in Germany overall and in Berlin. The Western Allies occupied western Germany, and the Soviet Union occupied the east. Berlin, located in the east, was divided into Allied-occupied West Berlin and Soviet-occupied East Berlin. The United Kingdom, France, and the United States combined the economies of the zones they controlled and prepared to unite the zones politically. The Soviet Union imposed Communist rule on its zone.

In June 1948, the Western Allies moved to rebuild the economy of their occupation zones in Germany. They reorganized the German monetary system and issued new money, replacing the virtually worthless existing currency. Under the aid program known as the Marshall Plan, U.S. aid began to pour into the Western Allied zones, and economic recovery got underway. The Soviets responded by stopping all highway, rail, and water travel between Berlin and western Germany. The Soviets hoped to force the Allies out of Berlin. However, the Allies set up the huge Berlin Airlift and flew about 8,000 tons (7,300 metric tons) of supplies into the city every day. The Soviet Union lifted the blockade in May 1949, realizing that the blockade had failed.