The Democratic-Republican Party, known at the time as the Republican Party (also referred to by historians as the Jeffersonian Republican Party), was an American political party founded by Thomas Jefferson and James Madison in the early 1790s. It championed liberalism, republicanism, individual liberty, equal rights, separation of church and state, freedom of religion, anti-clericalism, emancipation of religious minorities, decentralization, free markets, free trade, and agrarianism. In foreign policy, it was hostile to Great Britain and in sympathy with the French Revolution and Napoleonic Wars. The party became increasingly dominant after the 1800 elections as the opposing Federalist Party collapsed.

Increasing dominance over American politics led to increasing factional splits within the party. Old Republicans, led by John Taylor of Caroline and John Randolph of Roanoke, believed that the administrations of Jefferson, Madison, and Monroe—and the Congresses led by Henry Clay—had in some ways betrayed the republican "Principles of '98" by expanding the size and scope of the national government. The Republicans splintered during the 1824 presidential election. Those calling for a return to the older founding principles of the party were often referred to as "Democratic Republicans" (later Democrats) while those embracing the newer nationalist principles of "The American System" were often referred to as National Republicans (later Whigs).

The Republican Party originated in Congress to oppose the nationalist and economically interventionist policies of Alexander Hamilton, who served as Secretary of the Treasury under President George Washington. The Republicans and the opposing Federalist Party each became more cohesive during Washington's second term, partly as a result of the debate over the Jay Treaty. Though he was defeated by Federalist John Adams in the 1796 presidential election, Jefferson and his Republican allies came into power following the 1800 elections. As president, Jefferson presided over a reduction in the national debt and government spending, and completed the Louisiana Purchase with France.

Madison succeeded Jefferson as president in 1809 and led the country during the largely inconclusive War of 1812 with Britain. After the war, Madison and his congressional allies established the Second Bank of the United States and implemented protective tariffs, marking a move away from the party's earlier emphasis on states' rights and a strict construction of the United States Constitution. The Federalists collapsed after 1815, beginning a period known as the Era of Good Feelings. Lacking an effective opposition, the Republicans split into rival groups after the 1824 presidential election: one faction supported President John Quincy Adams and became known as the National Republican Party which later merged into the Whig Party, while another faction, one that believed in Jeffersonian democracy, backed General Andrew Jackson and became the Democratic Party.

Republicans were deeply committed to the principles of republicanism, which they feared were threatened by the aristocratic tendencies of the Federalists. During the 1790s, the party strongly opposed Federalist programs, including the national bank. After the War of 1812, Madison and many other party leaders came to accept the need for a national bank and federally funded infrastructure projects. In foreign affairs, the party advocated western expansion and tended to favor France over Britain, though the party's pro-French stance faded after Napoleon took power. The Democratic-Republicans were strongest in the South and the western frontier, and weakest in New England.

In the 1788–89 presidential election, the first such election following the ratification of the United States Constitution in 1788, George Washington won the votes of every member of the Electoral College. His unanimous victory in part reflected the fact that no formal political parties had formed at the national level in the United States prior to 1789, though the country had been broadly polarized between the Federalists, who supported ratification of the Constitution, and the Anti-Federalists, who opposed ratification. Washington selected Thomas Jefferson as Secretary of State and Alexander Hamilton as Secretary of the Treasury, and he relied on James Madison as a key adviser and ally in Congress.

Hamilton implemented an expansive economic program, establishing the First Bank of the United States, and convincing Congress to assume the debts of state governments. Hamilton pursued his programs in the belief that they would foster a prosperous and stable country. His policies engendered an opposition, chiefly concentrated in the Southern United States, that objected to Hamilton's Anglophilia and accused him of unduly favoring well-connected wealthy Northern merchants and speculators. Madison emerged as the leader of the congressional opposition while Jefferson, who declined to publicly criticize Hamilton while both served in Washington's Cabinet, worked behind the scenes to stymie Hamilton's programs. Jefferson and Madison, leading an Anti-Administration group, established the National Gazette, a newspaper which recast national politics not as a battle between Federalists and Anti-Federalists, but as a debate between aristocrats and republicans. In the 1792 election, Washington effectively ran unopposed for president, but Jefferson and Madison backed New York Governor George Clinton's unsuccessful attempt to unseat Vice President John Adams.

Political leaders on both sides were reluctant to label their respective faction as a political party, but distinct and consistent voting blocs emerged in Congress by the end of 1793. Jefferson's followers became known as the Republicans (or sometimes as the Democratic-Republicans) and Hamilton's followers (the Pro-Administration group) became the Federalists. While economic policies were the original motivating factor in the growing partisan split, foreign policy became even more important as war broke out between Great Britain (favored by Federalists) and France, which Republicans favored until 1799. Partisan tensions escalated as a result of the Whiskey Rebellion and Washington's subsequent denunciation of the Democratic-Republican Societies, a type of new local political societies that favored democracy and generally supported the Jeffersonian position. Historians use the term "Democratic-Republican" to describe these new organizations, but that name was rarely used at the time. They usually called themselves "Democratic", "Republican", "True Republican", "Constitutional", "United Freeman", "Patriotic", "Political", "Franklin", or "Madisonian". The ratification of the Jay Treaty with Britain further inflamed partisan warfare, resulting in a hardening of the divisions between the Federalists and the Republicans.