Hostility to Malaysia, which was established on September 16, 1963, as a union of states of the Malay Peninsula, Singapore, and the North Borneo states of Sabah and Sarawak, sprang from Sukarno's belief that it would function as a base from which Nekolim forces could subvert the Indonesian revolution. Malaysia's conservative prime minister, Tengku Abdul Rahman, had agreed to the continued basing of British armed forces in the country, and Sukarno could not forget that the government of independent Malaya had given assistance to the PRRI rebels in 1958. In the wake of Malaysia's creation, a wave of anti-Malaysian and anti-British demonstrations broke out, resulting in the burning of the British embassy. PKI union workers seized British plantations and other enterprises, which were then turned over to the government.

On September 23, 1963, Sukarno, who had proclaimed himself President-for-Life, declared that Indonesia must "gobble Malaysia raw." Military units infiltrated Malaysian territory but were intercepted before they could establish contact with local dissidents. This action--known as Confrontation (Konfrontasi--see Glossary) --soon involved Britain, the United States, the Soviet Union, and China. When the UN General Assembly elected Malaysia as a nonpermanent member of the Security Council in December 1964, Sukarno took Indonesia out of the world body and promised the establishment of a new international organization, the Conference of New Emerging Forces (Conefo), a fitting end, perhaps, for 1964, which Sukarno had called "A Year of Living Dangerously."

The year 1966 marked the beginning of dramatic changes in Indonesian foreign policy. Friendly relations were restored with Western countries, Confrontation with Malaysia ended on August 11, and in September Indonesia rejoined the UN. In 1967 ties with Beijing were, in the words of Indonesian minister of foreign affairs Adam Malik, "frozen." This meant that although relations with Beijing were suspended, Jakarta did not seek to establish relations with the Republic of China on Taiwan. That same year, Indonesia joined Malaysia, Thailand, the Philippines, and Singapore to form a new regional and officially nonaligned grouping, the Association of Southeast Asian Nations (ASEAN), which was friendly to the West.