During the 1960s, amidst the allegations that economic development and hiring for government jobs favoured West Pakistan, there was a rise in Bengali nationalism and an independence movement in East Pakistan began to gather ground. After a nationwide uprising in 1969, General Ayub Khan stepped down from office, handing power to General Yahya Khan, who promised to hold general elections at the end of 1970. On the eve of the elections, a cyclone struck East Pakistan killing approximately 500,000 people. Despite the tragedy and the additional difficulty experienced by affected citizens in reaching the voting sites, the elections were held and the results showed a clear division between East and West Pakistan. The Awami League, led by Sheikh Mujibur Rahman, won a majority with 167 of the 169 East Pakistani seats, but with no seats in West Pakistan, where the Pakistan Peoples Party (PPP) led by Zulfikar Ali Bhutto, won 85 seats, none in East Pakistan. However, Yahya Khan and Bhutto refused to hand over power to Sheikh Mujibur Rahman.

Meanwhile, Sheikh Mujibur Rahman initiated a civil disobedience movement, which was strongly supported by the general population of East Pakistan, including most government workers. A round-table conference between Yahya, Bhutto, and Sheikh Mujibur Rahman was convened in Dhaka, which, however, ended without a solution. Soon thereafter, the West Pakistani Army commenced Operation Searchlight, an organized crackdown on the East Pakistani army, police, politicians, civilians, and students in Dhaka. Sheikh Mujibur Rahman and many other Awami League leaders were arrested, while others fled to neighbouring India. Sheikh Mujibur Rahman was taken to West Pakistan. The crackdown widened and escalated into a guerrilla warfare between the Pakistani Army and the Mukti Bahini (Bengali "freedom fighters"). In March 1971, India's Prime Minister announced support for the Liberation War, providing military assistance. Ultimately 300,000 to 3,000,000 died in the war and millions Hindus and Bengali fled to India. On 27 March 1971, Major Ziaur Rahman, a Bengali war-veteran of the East Bengal Regiment of the Pakistan Army, declared the independence of East Pakistan as the new nation of Bangladesh on behalf of Mujib.

Following a period of covert and overt intervention by Indian forces in the conflict, open hostilities broke out between India and Pakistan on 3 December 1971. In Bangladesh, the Pakistani Army led by General A. A. K. Niazi, had already been weakened and exhausted by the Mukti Bahini's guerrilla warfare. Outflanked and overwhelmed, the Pakistani army in the eastern theatre surrendered on 16 December 1971, with nearly 90,000 soldiers taken as prisoners of war. The result was the defacto emergence of the new nation of Bangladesh, thus ending 24 years of turbulent union of the two wings. The figures of the Bengali civilian death toll from the entire civil war vary greatly, depending on the sources. Although the killing of Bengalis was unsupported by the people of West Pakistan, it continued for 9 months. Pakistan's official report, by the Hamood-ur-Rahman Commission, placed the figure at only 26,000, while estimates range up to 3 million.

Discredited by the defeat, General Yahya Khan resigned and Bhutto was inaugurated as president and chief martial law administrator on 20 December 1971.

Civilian rule returned after the war, when General Yahya Khan handed over power to Zulfikar Ali Bhutto. In 1972, Pakistan's ISI and MI learned that India was close to developing a nuclear weapon under its nuclear programme. In response, Bhutto called secret meeting, which came to known as Multan meeting, and rallied academic scientists to build the atomic bomb for national survival. Bhutto was the main architect of the programme as he planned the entire programme loosely based on Manhattan Project of 1940s. This programme was headed by large groups of prominent academic scientists and engineers, directly reported and headed by nuclear scientist Abdus Salam — who later won the Nobel Prize for Physics — to develop nuclear devices. In 1973, Parliament approved a new constitution, and Pakistan, for the first time, was declared Parliamentary democracy. In 1974, Pakistan was alarmed by the Indian nuclear test, and Bhutto promised to his nation that Pakistan would also have a nuclear device "even if we have to eat grass and leaves."