It was formed on 25 December 1949 by a group of former Labour Party of Indonesia (PBI) members, who had disagreed with the merger of PBI into the Communist Party of Indonesia.

Iskandar Tedjasukmana represented the party in government, serving as Minister of Labour in the Sukiman, Wilopo and Burhanuddin Harahap cabinets (1951–1956).

[5] The party was officially Marxist, but in political practice more influenced by nationalism.

[4] When the People's Representative Council (DPR) was formed in 1950, seven of its 236 members belonged to the Labour Party.

[3][8] After the election the party joined the Fraction of Upholders of the Proclamation, a heterogenous parliamentary group with ten MPs.