Before dawn on 19 December 1964, a coup d'état took place when the ruling military junta of South Vietnam led by General Nguyễn Khánh dissolved the High National Council (HNC) and arrested some of its members. The HNC was an unelected legislative-style civilian advisory body they had created at the request of the United States—South Vietnam's main sponsor—to give a veneer of civilian rule. The dissolution dismayed the Americans, particularly the ambassador, Maxwell D. Taylor, who engaged in an angry war of words with various generals including Khánh and threatened aid cuts. They were unable to do anything about the fait accompli that had been handed to them, because they strongly desired to win the Vietnam War and needed to support the Army of the Republic of Vietnam. Instead, Taylor's searing verbal attacks were counterproductive as they galvanized the Vietnamese officers around the embattled Khánh. At the time, Khánh's leadership was under threat from his fellow generals, as well as Taylor, who had fallen out with him and was seeking his removal.

The genesis of the removal of the HNC was a power struggle within the ruling junta. Khánh, who had been saved from an earlier coup attempt in September 1964 by the intervention of some younger generals dubbed the Young Turks, was indebted to them and needed to satisfy their wishes to stay in power. The Young Turks disliked a group of older officers who had been in high leadership positions but were now in powerless posts, and wanted to sideline them completely. As a result, they decided to hide their political motives by introducing a policy to compulsorily retire all general officers with more than 25 years of service. The chief of state Phan Khắc Sửu, an elderly figure appointed by the military to give a semblance of civilian rule, did not want to sign the decree without the agreement of the HNC, which mostly consisted of old men. The HNC recommended against the new policy, and the younger officers, led by I Corps commander General Nguyễn Chánh Thi and Air Marshal Nguyễn Cao Kỳ, disbanded the body and arrested some of its members along with other politicians.

As a result of this event, Taylor summoned Khánh to his office. Khánh sent Thi, Kỳ, the commander of the Republic of Vietnam Navy Admiral Chung Tấn Cang and IV Corps commander General Nguyễn Văn Thiệu, and after beginning with "Do all of you understand English?", Taylor harshly berated them and threatened cuts in aid. While angered by Taylor's manner, the officers defended themselves in a restrained way. The next day Khánh met Taylor and the Vietnamese leader made oblique accusations that the U.S. wanted a puppet ally; he also criticized Taylor for his manner the previous day. When Taylor told Khánh he had lost confidence in his leadership, Taylor was threatened with expulsion, to which he responded with threats of total aid cuts. Later however, Khánh said he would leave Vietnam along with some other generals he named, and during a phone conversation, asked Taylor to help with travel arrangements. He then asked Taylor to repeat the names of the would-be exiles for confirmation, and Taylor complied, not knowing that Khánh was taping the dialogue. Khánh then showed the tape to his colleagues out of context, misleading them into thinking that Taylor wanted them expelled from their own country to raise the prestige of his embattled leadership.

Over the next few days, Khánh embarked on a media offensive, repeatedly criticizing U.S. policy and decrying what he saw as an undue influence and infringement on Vietnamese sovereignty, explicitly condemning Taylor and declaring the nation's independence from "foreign manipulation". Khánh's misleading tactics had rallied the Young Turks around his fragile leadership for at least the short-term future. Afterward, Khánh and the Young Turks began preparations to expel Taylor before changing their minds. The Americans were forced to back down on their insistence that the HNC be restored and did not carry through on Taylor's threats to cut off aid despite Saigon's defiance.

On 26 September 1964, Nguyễn Khánh and the senior officers in his military junta created a semblance of civilian rule by forming the High National Council (HNC), an appointed advisory body akin to a legislature. This came after lobbying by American officials—led by Ambassador Maxwell Taylor—in Vietnam, as they placed great value in the appearance of civilian legitimacy, which they saw as vital to building a popular base for any government. Khánh put his rival General Dương Văn Minh—who he had deposed in a January 1964 coup—in charge of picking the 17 members of the HNC, and Minh filled it with figures sympathetic to him. The HNC then made a resolution to recommend a political model with a powerful head of state, which would likely be Minh, given their sympathy towards him. Khánh did not want his rival taking power, so he and the Americans convinced the HNC to dilute the powers of the position to make it unappealing to Minh, who was then sent on an overseas diplomatic goodwill tour to remove him from the political scene. However, Minh was back in South Vietnam after a few months and the power balance in the junta was still fragile.

The HNC, which had representatives from a wide range of social groups, selected the aging civilian politician Phan Khắc Sửu as chief of state, and Suu chose Trần Văn Hương as prime minister, a position that had greater power. However, Khánh and the senior generals retained the real power. At the same time, a group of Catholic officers were trying to replace Khánh with their co-religionist, General Nguyễn Văn Thiệu, and the incumbent was under pressure. During 1964, South Vietnam had suffered a succession of setbacks on the battlefield, in part due to disunity in the military and a focus on coup plotting. In the meantime, both Saigon and Washington were planning a large-scale bombing campaign against North Vietnam in an attempt to deter communist aggression, but were waiting for stability in the south before starting the air strikes.

Khánh and a group of younger officers called the Young Turks—led by chief of the Republic of Vietnam Air Force, Air Marshal Nguyễn Cao Kỳ, commander of I Corps General Nguyễn Chánh Thi and IV Corps commander Thiệu—wanted to forcibly retire officers with more than 25 years of service, as they thought them to be lethargic and ineffective, but most importantly, rivals for power. Most of the older officers had more experience under the Vietnamese National Army during the French colonial era, and some of the younger men saw them as too detached from the modern situation. The Young Turks had quite a lot of influence over Khánh, as Thi and Kỳ had intervened militarily to save him from a coup attempt in September by Generals Lâm Văn Phát and Dương Văn Đức.

One of the specific and unspoken aims of this proposed policy was to remove Generals Minh, Trần Văn Đôn, Lê Văn Kim and Mai Hữu Xuân from the military. This quartet, along with Tôn Thất Đính, had been the leading members of a junta that overthrew President Ngô Đình Diệm in November 1963. The generals who deposed Diệm did not trust Khánh because of his habit of changing sides, and Khánh was angered by their snubs. Khánh put Don, Kim, Xuan and Dinh under arrest in Da Lat after his January coup, claiming they were about to make a deal with the communists, a falsehood to cover up his motive of revenge. These four thus became known as the "Da Lat Generals". Khánh later released them and placed them into meaningless desk jobs with no work to do, although they were still being paid. Khánh did this as he thought the Young Turks had become too powerful and he hoped to use the Da Lat Generals as a counterweight. All this time, Minh had been allowed to continue as a figurehead chief of state due to his popularity, but Khánh was intent on sidelining him too. The Young Turks were fully aware of Khánh's motives for rehabilitating the Da Lat Generals, and wanted to marginalize them. In public, Khánh and the Young Turks claimed the Da Lat Generals and Minh, who had returned from his overseas tour, had been making plots with the Buddhist activists to regain power.