The party was established as the Peace Democratic Party (Korean: 평화민주당; Hanja: 平和民主黨; RR: Pyeonghwaminjudang; MR: P'yŏnghwaminjudang; PDP) in October 1987 by Kim Dae-jung and his followers to contest the presidential election that year.

Following the June Struggle of 1987, and the June 29 Declaration, which promised direct, democratic election of the president in the upcoming presidential election in December of that year, speculation for the potential candidacy of Kim Dae-jung for the presidency grew.

The Declaration also promised amnesty to Kim Dae-jung, who was under the house-arrest and was barred from engaging in any political activity under the fabricated charge of "inciting rebellion" since 1981.

Despite the effort to present the single "democratic" candidate for the 1987 presidential election, the negotiation between two politicians broke down.

Kim Dae-jung and Kim Young-sam's candidacy resulted in vote-splitting of the "Democratic" candidates, resulting in the election of Roh Tae-woo, protégé of dictator Chun Doo-hwan to take the office with 36.6% of votes.