The Finnish Democratic Republic was established by Joseph Stalin upon the outbreak of the Winter War and headed by Otto Wille Kuusinen to govern Finland after Soviet conquest.

Terijoki was the first town in Finland captured by the Red Army after the Soviet invasion, and the new government was seated there as its de facto capital.

Immediately upon arrival in Helsinki, capital of the country, it will be reorganised and its composition enlarged by the inclusion of representatives of the various parties and groups participating in the people's front of toilers.

The final composition of the People's Government, its powers and actions, are to be sanctioned by a Diet elected on the basis of universal equal direct suffrage by secret ballot.

On the first day of its existence, the Kuusinen regime agreed to lease the Hanko Peninsula; to cede a slice of territory on the Karelian Isthmus; and to sell an island in the Gulf of Finland, along with sections of the Kalastajasaarento near the Arctic Ocean to the Soviet Union.

The Democratic Republic also failed to gain any international recognition aside from the Soviet Union itself,[6] although a number of prominent left-wing activists and writers such as Jawaharlal Nehru, George Bernard Shaw, Martin Andersen Nexø and John Steinbeck voiced their support for the government.

[13] Joseph Stalin was well aware of the domestic political situation in Finland based on Soviet intelligence information, and thus did not anticipate that the establishment of the Democratic Republic would cause any revolutionary action or popular uprisings against the existing Finnish Government.

[15] The Soviets had increasingly began to seek rapprochement with the Finnish government during the course of the Winter War and the Kuusinen regime fell out of favor.