With the Third Home Rule Bill under discuission now for 7 years, with no implementation, the IVF decided that they had waited long enough and that they would have to take action to increase the pace. They also hoped that by becoming a formidable military force, they could persuade the government to introduce complete Independence rather than the proposed Home Rule solution. In 1919 they renamed themselves the Irish Republican Army (IRA) which really signalled the start of a new phase in their history.

On 21 January 1919, the IRA shot dead 2 Irish policemen in county Tipperary, and this marked the beginning of what is now known as the War of Independence. The Catholic church condemned the IRA, and the locals, who knew exactly who the IRA men involved were, were also appalled. However the British clamped down hard in response and soon a guerrilla war was underway in counties Cork and Tipperary. With the post-war British army in a shambles, they were only willing to send over groups of ex-First World War solders to fight. The combination of black police uniforms and tan army outfits gave rise to the term 'Black and Tans' for these men. The 'Black and Tans' were undisciplined and often shot innocent civilians in reprisal for attacks on them. These attacks helped to create and then strengthen local support for the IRA.

In 1920 the IRA, led by a Corkman named Michael Collins, concluded that the war was not having the desired effect and decided to intensify the war. On 21 November 1920, the IRA shot dead 11 British agents. In reprisal, a group of Black and Tans fired randomly into a crowd of civilians at a Gaelic football match at Croke Park, Dublin. 12 people were killed and the day became known as Bloody Sunday. (Not to be confused with another Bloody Sunday much later.) Ten days later the IRA shot dead 17 British soldiers in county Cork.

Meanwhile, despite the conflict, the government decided to press ahead with Home Rule and passed the Government of Ireland Act in 1920. This gave Ireland 2 Parliaments (each with a Prime Minister), one for the Unionists and one for the Nationalists, but kept both Parliaments answerable to the overall UK parliament in London. Six counties (Londonderry, Tyrone, Fermanagh, Antrim, Down and Armagh) were to be under the Unionist Parliament, and the citizens there agreed to the creation of 'Northern Ireland' by way of a referrendum. The first elections for the Northern Ireland parliament were held in May 1921 and the Unionists got 40 of the 52 seats. It first met in Belfast in June 1921. The new Northern Ireland Prime-Minister was the Ulster Unionist leader, Sir James Craig.

The elections were held for the Nationalist Parliament in Dublin in May 1921 also, and Sinn Féin (under Eammon de Valera) took 124 seats with the remaining 4 being taken by Unionist candidates. However Sinn Féin refused to recognise the Parliament and instead continued to meet in Dail Eireann. The 4 Unionists were the only ones who attended the new Parliament. The IRA, under Collins, continued to fight on for more independence, and made regular attacks on Protestants in Northern Ireland too. Finally stalemate was reached and a truce was signed between the IRA and the British on 11 July 1921. After 4 months of negotiations a treaty was hammered out which Michael Collins signed on behalf of the IRA. However he did not fully consult his colleagues, many of whom were horrified that he had accepted partition. This is why he is now regarded by some as a traitor and this probably contributed to his assassination a short time later.

The 'Anglo-Irish Treaty', which was agreed between Collins and the British government, replaced the Dublin Home-Rule Parliament which had been created by the Government of Ireland Act. The new Act created an Ireland which was much more independent than it would have been under pure Home Rule, and certainly much more independent than the bit of Ireland ruled by the Northern Ireland government. The new country was to be called the 'Irish Free State' and would have its own army, although it would remain within the British Commonwealth. This is a similar status to that which Canada has today. Britain would also have a representative in Ireland and would keep some naval bases in Irish waters. The treaty also set up a Boundary Commission which was to fine-tune the border to take account of Unionist/Nationalist communities close to it. The Sinn Fein leader, Eamonn de Valera, became the first Prime Minister of the Irish Free State.

The UK was renamed 'The United Kingdom of Great Britain and Northern Ireland' to reflect the change. To oversee that the 2 Irish states got along, a Council of Ireland was set up to manage relations. The British believed that the 2 Parliaments would soon settle their differences and agree to unite, and the Council of Ireland was to oversee this reunification as well. However, in the end, the Council of Ireland never met.