During the final stages of the Chinese Civil War, Fu surrendered the large and strategic garrison around Beiping to Communist forces.

The activities of Fu's farmer-soldiers included mining Suiyuan's iron deposits (24% of all in China) and bringing over 4,000 acres (16 km2) of farmland under cultivation for the first time.

These Japanese-aligned troops seized the city of Bailingmiao in northern Suiyuan, where the pro-Japanese Inner Mongolian Autonomous Political Council maintained its headquarters.

Three months later, the head of the Political Council, Demchugdongrub declared that he was the ruler of an independent Mongolia (Mengguguo), and organized an army with the aid of Japanese equipment and training.

In August 1936 Demchugdongrub's army attempted to invade eastern Suiyuan, but it was defeated by Yan's forces under the command of Fu Zuoyi.

[3] In anticipation of the Second Sino-Japanese War, Japanese spies destroyed a large supply depot in Datong and carried out other acts of sabotage.

During the Chinese Civil War, Fu's forces (500,000 men) controlled the critically important Suiyuan-Beiping Corridor that separated Manchuria from China proper.

Fu began secret negotiations with Lin Biao, in which he arranged the surrender of the Beiping garrison, totaling a quarter of a million men, on January 31, 1949.

During the Cultural Revolution (1966–1975) Fu was part of a list of people drafted by Zhou Enlai and approved by Mao to be protected and was moved to Jingxi Hotel for safeguarding.