Fretilin called for the return of Portuguese authorities and a resumption of decolonisation discussions, while setting up a caretaker government to manage the territory in the meantime.

Following the refusal of Portuguese authorities to return, and losing ground to the combined UDT–Indonesian offensive, Fretilin hastily declared the independent Democratic Republic of East Timor.

Indonesia responded by publicly coming out in favour of annexation, launching a full-scale invasion on 7 December, and setting up the Provisional Government of East Timor led by its allied political parties.

[2]: 417 UDT formed from members of the former National Union party, and was linked to government officials, police, local rulers, the Catholic church, and Portuguese and Chinese businessmen.

It was conservative and sought to protect the middle class of Dili, advocating for an undisruptive transition that maintained existing government systems and close links to Portugal.

It was led by individuals including Francisco Xavier do Amaral, a government official, José Ramos-Horta, a reporter for A Voz de Timor who had previously been exiled for political reasons, and Nicolau dos Reis Lobato, a teacher.

The party explicitly distanced itself from communism and sought a non-aligned foreign policy based on relationships with nearby countries and links to ASEAN and the Portuguese-speaking world.

[3]: 26 Having recently lost the Vietnam War, Western anti-communist countries were wary of the spread of communism further into Southeast Asia, and saw Indonesia as an ally in this regard.

[3]: 14, 17–20 The Portuguese minister for inter-territorial coordination, António de Almeida Santos, visited the region in October 1974, for meetings in East Timor, Australia, and Indonesia to discuss the future of the territory.

[5]: 13  In November 1974 Mário Lemos Pires, a military officer linked to the new Portuguese regime rather than the overthrown one, was appointed Governor of East Timor.

[5]: 14 While the UDT was initially the strongest party and was favoured by Portuguese authorities, its hesitation to embrace the idea of independence led majority support to shift to Fretilin.

[5]: 9  In December 1974 Malik was reported to have stated that independence was not an option for East Timor, prompting discussions between UDT and Fretilin on potential cooperation.

Fretilin was becoming more radical with the inclusion of new members such as students linked to the Portuguese Communist Party, and was seeking support from overseas trade unions.

[4] Increasingly hostile rhetoric led to the Portuguese authorities disallowing both sides from issuing political broadcasts over the government's radio system on 19 June.

With Fretilin unable to convince the Governor to end what they saw as police harassment, many fled the city south on the night of 10 August,[2]: 415  with much of the leadership going to Aileu.

[6]: 123 Shortly after midnight, UDT forces, led by João Viegas Carrascalão, began a takeover of key points in Dili and Baucau, including their airports, ports, and radio stations.

[3]: 41  Street violence against Fretilin members led to the burning of some homes and of the National Workers' Union office as UDT gained full control of both cities.

[3]: 41 On 13 August UDT declared the creation of the "Movement for the Unity and Independence of the Timorese People", and sought the allegiance of the police, military, and commercial companies.

[3]: 41–42  Prior to the outbreak of the civil war, Portuguese military forces in East Timor were divided into 13 geographical commands, each with their own leaders and armoury.

Unable to control the conflict with the few Portuguese troops that he had at his disposal, Lemos Pires decided to leave Dili with his staff and transfer the seat of the administration to the nearby island of Atauro on 27 August 1975.

[2]: 417  The interim Fretilin administration repeatedly requested Portuguese authorities return to Dili from Atauro, and left the Governor's office vacant.

The Australian Council For Overseas Aid and the International Red Cross sent food, although the amount was insufficient to meet the needs of displaced refugees.

Fretilin instructed refugees to return to their hometowns to grow crops, and began to develop a rationing system (plans which would be halted by the Indonesian invasion).

[5]: 22  The Australian Council For Overseas Aid sent representatives to Dili to try to broker talks between Fretilin and UDT, although this initiative was unsuccessful and did not gain Portuguese support.

[3]: 46 In late September the UDT announced it had formed a coalition with Apodeti, KOTA, and Trabalhista, declared it no longer considered Portugal to be sovereign over the territory, and advocated for Indonesian annexation.

On 14 September the Indonesian military directly fought with Fretilin in Atsabe Administrative Post as attacks were launched at multiple points along the border.

[1] Fighting continued and Atabae Administrative Post was lost to pro-Indonesian forces,[2]: 417–418  having been until then defended by East Timorese soldiers who were part of a Portuguese cavalry company.

A delegation including Mari Alkatiri and César Mau Laka [de] sent to Africa in November reported that 25 countries would recognise East Timorese independence.

[3]: 47–48 An independent East Timor was recognised by Angola, Cape Verde, Guinea-Bissau, Mozambique, and Sao Tomé and Príncipe, all also former Portuguese colonies.

[3]: 58, 61, 63  On 4 December Marí Alkatiri, Abílio Araújo [de], José Ramos-Horta, Rogério Lobato, and Roque Rodrigues left on a diplomatic mission to gain support for the new government.