By 1965 Indonesia had become a dangerous cockpit of social and political antagonisms. The PKI's rapid growth aroused the hostility of Islamic groups and the military. The ABRI-PKI balancing act, which supported Sukarno's Guided Democracy regime, was going awry. One of the most serious points of contention was the PKI's desire to establish a "fifth force" of armed peasants and workers in conjunction with the four branches of the regular armed forces (army, navy, air force, and police). Many officers were bitterly hostile, especially after Chinese premier Zhou Enlai offered to supply the "fifth force" with arms. By 1965 ABRI's highest ranks were divided into factions supporting Sukarno and the PKI and those opposed, the latter including ABRI chief of staff Nasution and Major General Suharto, commander of Kostrad. Sukarno's collapse at a speech and rumors that he was dying also added to the atmosphere of instability.

The circumstances surrounding the abortive coup d'état of September 30, 1965--an event that led to Sukarno's displacement from power; a bloody purge of PKI members on Java, Bali, and elsewhere; and the rise of Suharto as architect of the New Order regime--remain shrouded in mystery and controversy. The official and generally accepted account is that procommunist military officers, calling themselves the September 30 Movement (Gestapu), attempted to seize power. Capturing the Indonesian state radio station on October 1, 1965, they announced that they had formed the Revolutionary Council and a cabinet in order to avert a coup d'état by corrupt generals who were allegedly in the pay of the United States Central Intelligence Agency. The coup perpetrators murdered five generals on the night of September 30 and fatally wounded Nasution's daughter in an unsuccessful attempt to assassinate him. Contingents of the Diponegoro Division, based in Jawa Tengah Province, rallied in support of the September 30 Movement. Communist officials in various parts of Java also expressed their support.

The extent and nature of PKI involvement in the coup are unclear, however. Whereas the official accounts promulgated by the military describe the communists as having a "puppetmaster" role, some foreign scholars have suggested that PKI involvement was minimal and that the coup was the result of rivalry between military factions. Although evidence presented at trials of coup leaders by the military implicated the PKI, the testimony of witnesses may have been coerced. A pivotal figure seems to have been Syam, head of the PKI's secret operations, who was close to Aidit and allegedly had fostered close contacts with dissident elements within the military. But one scholar has suggested that Syam may have been an army agent provocateur who deceived the communist leadership into believing that sympathetic elements in the ranks were strong enough to conduct a successful bid for power. Another hypothesis is that Aidit and PKI leaders then in Beijing had seriously miscalculated Sukarno's medical problems and moved to consolidate their support in the military. Others believe that ironically Sukarno himself was responsible for masterminding the coup with the cooperation of the PKI.

In a series of papers written after the coup and published in 1971, Cornell University scholars Benedict R.O'G. Anderson and Ruth T. McVey argued that it was an "internal army affair" and that the PKI was not involved. There was, they argued, no reason for the PKI to attempt to overthrow the regime when it had been steadily gaining power on the local level. More radical scenarios allege significant United States involvement. United States military assistance programs to Indonesia were substantial even during the Guided Democracy period and allegedly were designed to establish a pro-United States, anticommunist constituency within the armed forces.

In the wake of the September 30 coup's failure, there was a violent anticommunist reaction. By December 1965, mobs were engaged in large-scale killings, most notably in Jawa Timur Province and on Bali, but also in parts of Sumatra. Members of Ansor, the Nahdatul Ulama's youth branch, were particularly zealous in carrying out a "holy war" against the PKI on the village level. Chinese were also targets of mob violence. Estimates of the number killed--both Chinese and others--vary widely, from a low of 78,000 to 2 million; probably somewhere around 300,000 is most likely. Whichever figure is true, the elimination of the PKI was the bloodiest event in postwar Southeast Asia until the Khmer Rouge established its regime in Cambodia a decade later.