On 23 August 1939 the USSR and Germany signed a non-aggression pact, known as "The Ribbentrop-Molotov Pact", which contained a secret protocol in which the two powers divided Eastern Europe between them.

Soon after that, on 1st September 1939, Germany attacked Poland starting World War II. The Polish army was destroyed quickly and, on 17 September, the USSR invaded the eastern part of the country. Romania allowed the Polish government and gold reserves, as well as 100,000 soldiers and civilians to transit its territory.

After the fall of France on 22 June 1940 and the retreat of English forces from the continent, Romania lost its most important allies. In these conditions, the USSR occupied Bessarabia and Northern Bukovina on 28 June, Hungary took Northern Transylvania on 30 August, and Bulgaria received Southern Dobruja on 7 September. Romania was now two thirds of its former size.

On 6 September 1940, King Carol II abdicated in favor of his son Mihai I, who, on the same day, gave prime-minister general Ion Antonescu unlimited power. The general decided to form a new government with the Iron Guard (a.k.a. "The Legion of the Archangel Michael"). On 23 November 1940, Antonescu signed the Tripartite Pact, following the arrival of the German Military Mission on 12 October. These troops were sent to train the Romanian Army and to protect the oil fields and refineries. By spring 1941, in Romania were stationed 370,000 German troops.

However, the Iron Guard proved to be more of a problem than a solution for Antonescu. The feeling was mutual, so between 21 and 23 January 1941 the Legion tried to gain total power by force. Antonescu had the support of the army (and the tacit accord of Hitler) and used it to destroy the Iron Guard. Its members were killed or arrested. The leaders fled to Germany. Hitler kept them in reserve in case Antonescu betrayed him. For the moment, he had chosen the general over the fascists.