Until 1990, the Mongolian Government was modeled on the Soviet system; only the communist party--the MPRP--officially was permitted to function. After some instability during the first two decades of communist rule in Mongolia, there was no significant popular unrest until December 1989. Collectivization of animal husbandry, introduction of agriculture, and the extension of fixed abodes were all carried out without perceptible popular opposition.

The birth of perestroika in the former Soviet Union and the democracy movement in eastern Europe were mirrored in Mongolia. The dramatic shift toward reform started in early 1990 when the first organized opposition group, the Mongolian Democratic Union, appeared. In the face of extended street protests in subzero weather and popular demands for faster reform, the politburo of the MPRP resigned in March 1990. In May, the constitution was amended, deleting reference to the MPRP's role as the guiding force in the country, legalizing opposition parties, creating a standing legislative body, and establishing the office of president.

Mongolia's first multi-party elections for a People's Great Hural were held on 29 July 1990. The MPRP won 85% of the seats. The People's Great Hural first met on 3 September and elected a president (MPRP), vice president (SDP--Social Democrats), prime minister (MPRP), and 50 members to the Baga Hural (small Hural). The vice president also was chairman of the Baga Hural. In November 1991, the People's Great Hural began discussion on a new constitution, which entered into force February 12. In addition to establishing Mongolia as an independent, sovereign republic and guaranteeing a number of rights and freedoms, the new constitution restructured the legislative branch of government, creating a unicameral legislature, the State Great Hural (SGH).

The 1992 constitution provided that the president would be elected by popular vote rather than by the legislature as before. In June 1993, incumbent Punsalmaagiyn Ochirbat won the first popular presidential election running as the candidate of the democratic opposition.

As the supreme government organ, the SGH is empowered to enact and amend laws, determine domestic and foreign policy, ratify international agreements, and declare a state of emergency. The SGH meets semiannually. SGH members elect a chairman and vice chairman who serve 4-year terms. SGH members are popularly elected by district for 4-year terms.

Until June 27, 2004, the predominant party in Mongolia was the ex-communist party Mongolian People's Revolutionary Party or MPRP, which was formed by Mongolia's communist leaders after the end of the Cold War. The main opposition party was the Democratic Party or DP, which controlled a governing coalition from 1996 to 2000.

From 2000 to 2004 MPRP was back in power, but results of the 2004 elections required the establishing of the first ever coalition government in Mongolia between the MPRP and MDC (Motherland Democratic Coalition).

Mongolia uses a parliamentary system where the president has a symbolic role and the "government" chosen by the legislature is the executive power. The legislative power State Great Khural, has one chamber with 76 seats and is chaired by the speaker of the house.

On January 13, 2006 the parliament's 39 members, mostly MPRP but including four Democratic Party members Mendsaikhan Enkhsaikhan, Janlavyn Narantsatsralt, Mishig Sonompil, Jamiyandorj Batkhuyag, overthrew democrat Tsakhiagiyn Elbegdorj's grand coalition government violating the Constitution as it exceeded its power. This was based on the MPRP Directing Board's decision which violates its three agreements with the Democratic Party. Mongolians made strong protests against the MPRP and the Parliament's decision to overthrow Elbegdorj's Government almost over four months. MPRP did not have enough reason to overthrow Elbegdorj's government. However, the event immediately followed the arrest of Mongolia's Customs Chairman Baatar on spot of corruption. Baatar claimed his key ties are MPRP leaders according to Mongolian newspapers.

Three of the four DP MPs who violated its own party decision were rewarded with positions in the new MPRP government, at the price of getting expelled from the DP afterwards. Chairman of MPRP Miyeegombo Enkhbold became the new prime minister on January 26th. The power shift triggered strong protests against the MPRP by several civil and political organisations.

In February 2006, MP Tsogtyn Bataa changed sides from the Motherland Party to the MRPR, giving the latter exactly 50% of the seats.

In April 2006, Tsakhiagiyn Elbegdorj was elected as a Democratic Party chairman by the two step elections of the party.