Initially restricted by the Treaty of Trianon to 35,000 men, the army was steadily upgraded during the 1930s and fought on the side of the Axis powers during World War II.

In July 1919 the former Commander-in-Chief of the Austro-Hungarian Navy, Admiral Miklós Horthy, had begun to set up the "National Army" (Hungarian: Nemzeti Hadsereg) as directed by the opposition government.

After the withdrawal of Romanian troops in 1919/20 they took over the defence of the country, but remained dependent on the goodwill of the victorious powers that had met at the Paris Peace Conference.

The Treaty of Trianon that was signed on 4 June 1920 confirmed Hungary's territorial losses and restricted its armed forces to a volunteer organisation of 35,000 men.

The most important of these was the gendarmerie (Hungarian: Csendőrség) which was subordinated to the Interior Ministry and was organised in the same way as the military districts and whose strength in places clearly exceeded that of the regular armed forces.

Monitoring by the allied control commission ended on 31 March 1927 and in the same year the government of István Bethlen signed a treaty of friendship with Fascist Italy which was intended to form a counterweight to the encirclement of Hungary by the powers of the Little Entente.

In the years that followed the armament of the army, which had hitherto still consisted of wartime and pre-war stock, was modernised and, especially under Gyula Gömbös, defence minister from 1929, clandestinely expanded.

On 5 March 1938, Prime Minister Kálmán Darányi announced the Győr Programme that envisaged the investment of a billion pengő over 5 years on the expansion of the armed forces.

On 11 April 1941, following Telekis' suicide and by Hitler's invitation, the Hungarian 3rd Army joined the Balkans Campaign in the wake of which Bačka, Baranya, Prekmurje and Medjimurje were annexed.

The Chief of the General Staff, Henrik Werth, who was of German origin, pressed however for Hungarian participation in the campaign, supported by the Defence Minister, Károly Bartha.

Hitler had previously reached an agreement during a meeting with Horthy to provide five Hungarian "security brigades" to protect the hinterland in exchange for the deployment of the Rapid Corps.

These were subordinated to the occupation group (Hungarian: Magyar Megszálló Csoport) formed on 6 October 1941, whose headquarters was moved from Vinnytsia to Kiev in December.

The army took part in the German summer offensive, Fall Blau, that began in June 1942, and reached the River Don south of Voronezh in July, where it moved into defensive positions.

Two corps with a total of nine security divisions remained in the Soviet Union, where they were increasingly drawn into the fight with the advancing Red Army.

After the Hungarian government of Miklós Kállay had entered into negotiations with the Western Powers in summer 1943 over a separate peace agreement, Germano-Hungarian relations noticeably worsened.

In April the 1st Army under Géza Lakatos was sent to the front in East Galicia, in order to prevent the Soviets seizing the Carpathian passes.

In the wake of the Carpatho-Dukla Offensive and Battle of Debrecen, the Hungarian-German armies were pushed back during September and October into the Great Hungarian Plain.

During these battles, on 15 October, Reichsverweser Horthy was removed by the SS after his unilateral agreement of a ceasefire with the Soviet Union during Operation Panzerfaust, and the Arrow Cross Party under Ferenc Szálasi took over the government and control of the army.

As a result, the commander of the 1st Army, Béla Miklós, went over to the Soviet side and they installed him as head of an opposition government with its headquarters in Debrecen.