Under Section 2 of the 1920 Act, the Council was established with the following purpose: With a view to the eventual establishment of a Parliament for the whole of Ireland, and to bringing about harmonious action between the parliaments and governments of Southern Ireland and Northern Ireland, and to the promotion of mutual intercourse and uniformity in relation to matters affecting the whole of Ireland, and to providing for the administration of services which the two parliaments mutually agree should be administered uniformly throughout the whole of Ireland, or which by virtue of this Act are to be so administered, there shall be constituted, as soon as may be after the appointed day, a Council to be called the Council of Ireland.Under Section 7 of the 1920 Act, the Council could make orders concerning matters which were within the remit of the respective Parliaments of Southern and Northern Ireland.
The Anglo-Irish Treaty made provision for the continuation of the Council of Ireland after the Irish Free State was established.
Under the Treaty, if Northern Ireland chose to opt out of the Irish Free State (as in fact it subsequently did), the Council was to continue but the Council's powers could then only be applied to Northern Ireland and not to the Irish Free State.
Therefore, after the Treaty, it was no longer the all-Ireland body originally envisaged as its powers applied only to Northern Ireland.
On 23 January 1922 Michael Collins, then head of the Provisional Government in Dublin, met Sir James Craig, then Prime Minister of Northern Ireland, in London, and they agreed amongst other matters that: "The two Governments [are] to endeavour to devise a more suitable system than the Council of Ireland for dealing with problems affecting all Ireland.