Complaining about the heavy-handed rule of the president, and in particular his interference in congressional elections, Congress led a revolt against Balmaceda in 1891. Conservatives generally supported the rebels; Liberals and Democrats backed the president. Along with some renegade Liberals, the newly emergent Radical Party aligned with the so-called congressionalists, not wishing to see legislative prerogatives curtailed just as the party was gaining clients and strength. Those provincials resentful of the growing centralization of political and economic power in and around Santiago also backed the rebellion, especially in the north. Initially, the navy, the armed service that included the highest percentage of aristocrats, sided with the rebels; the army sided with the president.

The rebellion also attracted British entrepreneurs worried by Balmaceda's threat to encroach on the independence and revenues of the foreign-owned nitrate mines. Although not opposed to foreign investment, Balmaceda had proposed a greater role for the state and higher taxes in the mining sector. Tension mounted because nitrate sales were in a slump, a recurring problem because of the volatility of that commodity's price on international markets. The most famous British mine owner was John North, the "nitrate king," who was angry that his nitrate railroad monopoly had been terminated by Balmaceda. Although not directly involved, the United States supported Balmaceda as the legal president.

The insurgents won the bloody but brief Civil War of 1891, when the army decided not to fight the navy. As a result of the rebel victory, Congress became dominant over the chief executive and the nitrate mines increasingly fell into British and North American hands. Having gained asylum in the Argentine embassy, Balmaceda waited until the end of his legal presidential term and then committed suicide. As Portales became a legendary hero to the right, so Balmaceda was later anointed by the left as an economic nationalist who sacrificed his life in the struggle for Chilean liberation.

Already tense as a result of the civil war over Balmaceda, United States-Chilean relations deteriorated further as a result of the Baltimore incident. In late 1891, sailors from the U.S.S. Baltimore brawled with Chileans during shore leave in Valparaíso. To avert a war with an angry United States, the Chilean government apologized and paid reparations.