From the founding of the new republic, the United States took a proprietary attitude toward it. Troops were brought in to quell election disturbances in 1908 and 1917, and in 1918 the United States assumed police power over Panama. Growing American involvement in Panamanian affairs caused profound resentment, and in a new treaty in 1936 the United States agreed to a policy of nonintervention. This treaty was ratified in 1939.

The government of Panama was relatively stable, although presidents were deposed in 1931, 1941, and 1951. Colonel José Remón, chief of police who seized the government in 1951, was elected president in 1952. In 1955 he was assassinated. Anti-United States sentiment resulted in rioting in 1959. In 1964, rioters protesting the flying of United States flags invaded the Canal Zone. United States troops were used to help restore order within the zone. Panama demanded complete revision of the treaties between the two countries. Negotiations, however, were inconclusive.

In October, 1968, Colonel (later General) Omar Torrijos overthrew the government in a military coup. In 1972 a newly elected representative assembly adopted a constitution that recognized Torrijos as the head of government and granted him dictatorial powers. He negotiated a treaty with the United States, signed in 1977, that provided for the transfer of the Canal Zone to Panama in 1979 and the canal in 1999. In 1978 he formally resigned as chief of government but retained actual control. Torrijos was killed in a helicopter crash in 1981, but the military remained in power.

In 1983 General Manuel Antonio Noriega took command of the Panama Defense Forces (PDF) and control of the country. Despite the election of a civilian president in 1984, Noriega retained power. In 1988 federal grand juries in the United States indicted Noriega on charges stemming from Panamanian involvement in the illegal importation of drugs into the United States. When Guillermo Endara, the candidate of the opposition, won the presidential election in early 1989, Noriega nullified the election and widespread violence erupted. In October, a coup attempt against Noriega failed.

Meanwhile, tensions with the United States increased. After a Panamanian soldier killed a U.S. Marine officer in an altercation, the United States sent combat troops into Panama in December, 1989. Resistance by the PDF was quickly put down. Noriega was apprehended and extradited to the United States in January, 1990, and was eventually convicted on drug charges and imprisoned. As the elected president, Endara took office in 1990. Panama's first female president, Mireya Moscoso, was elected in 1999. At the end of the year, the United States transferred control of the Panama Canal to Panama.