The movement was set within the context of growing dissatisfaction with the Central Government and Indonesia's faltering economic development. The Central Government was seen by some in the outer islands as disconnected from the Indonesian people. Some Army commands in the outer islands began covertly operating smuggling operations of Copra and contraband items to improve their financial position. These operations were soon followed with requests for greater economic and political autonomy from the Central Government in Jakarta. After their demands were not met they began to rebel against the government, conducting a series of bloodless coups within their regional command areas, and setting up alternative local government systems. The rebel army commands included:
Dewan Banteng in Central Sumatra which on 20 December 1956 under the leadership of Lieutenant Colonel Ahmad Hussein (commander of the 4th regiment of the Territorial Army in Sumatra) began to take over the local government of Central Sumatra.
Dewan Gajah in East Sumatra under Colonel Mauluddin Simbolon (Supreme Commander of the Territorial Army in Sumatra) which on 22 December on the same year began to take over the government of East Sumatra and cut all relation with the government.
Dewan Garuda in South Sumatra which on 15 January 1957 under Lieutenant Colonel Barlian took over the local government of South Sumatra.
On 15 February 1958 Lieutenant Colonel Ahmad Hussein declared the formation of the PRRI as an alternative revolutionary government of Indonesia. Two days later the Permesta rebels in East Indonesia pledged allegiance with the PRRI. The Central Government in Jakarta, having tolerated the dissident Army Councils for almost twelve months, promptly began preparations to militarily defeat the revolutionary government. With the Americans posturing to become directly involved in the crisis, General Nasution conducted surprise amphibious assaults on rebel cities in Sumatra during March 1958. Nasution dishonorably discharged the three colonels. Army chief of staff Nasution Army immediately announced that the territorial army would be placed under his command. With the military balance swiftly swinging back in favour of the Central Government in Jakarta during the period March-May 1958, the United States had to reconsider its previous policy assessment that the break-up of Indonesia and emergence of a Communist government was likely.
The United States Government, especially the CIA (see CIA activities in Indonesia) had covertly supported the rebel PRRI Government in 1958, despite some dissent in the agency from Desmond Fitzgerald. The Pope incident on 18 May 1958 signalled the beginning of the end of the CIA's program of covert support to the PRRI, with the US shifting its support back towards Sukarno and the Central Government as the anticipated victor from the conflict. The Central Government recaptured Menado in June 1958, forcing the remaining rebel forces to conduct a guerilla campaign in the ensuing years.
One of the most significant outcomes of the conflict was the establishment of Soviet arms aid to the Indonesian Government. As the crisis had unfolded, the Indonesian Government had approached the American Government for arms to combat the rebel commands. The Americans, however, had declined the Indonesian request, forcing the Indonesians to approach the Soviet Union for assistance. The Soviet Union thus became a major supplier of arms to the Indonesian Government, allowing Indonesia to rapidly modernize its armed forces into one of the most strongest in Southeast Asia. This had flow on effects in the West New Guinea dispute as Indonesia was able to escalate tensions in the dispute by threatening overt conflict.