López Arellano rapidly moved to consolidate his hold on power. Growing radical influence had been one of the reasons advanced to justify the coup; once in power the government disbanded or otherwise attacked communist, pro-Castro, and other elements on the left. The Agrarian Reform Law was effectively nullified, in part by the regime's refusal to appropriate money for the National Agrarian Institute (Instituto Nacional Agrario--INA). The country's two peasant unions were harassed, although a new organization of rural workers, the National Union of Peasants (Unión Nacional de Campensinos--UNC), which had Christian Democratic ties, actually expanded in the mid- and late-1960s. López Arellano promised to call elections for yet another legislature, and early in 1964 his government was recognized by the new United States administration of President Lyndon B. Johnson. Shortly thereafter, military assistance, which had been suspended following the coup, was resumed.

Close ties soon developed between the military government and the PNH. A key factor in the development of these links was PNH leader Ricardo Zúñiga Augustinius, who became secretary of state for the presidency, the key cabinet position. Numerous other party members served in the government, giving it a civil-military character but widening the gap between the administration and the PLH. Also linked to the government was a secret organization used to attack the left and intimidate political opponents. Known as the Mancha Brava (Tough Spot), it reputedly drew much of its membership from the ranks of public employees.

To give a semblance of legality to his government, López Arellano promulgated a new constitution with a unicameral Congress. He then called elections for this new Congress. A general amnesty for political figure was decreed in November, exiles were allowed to return, and the PLH resumed political activity. The PNH had pledged throughout the campaign that if it gained control of the Congress, its members would select López Arellano as president. The vote was held on February 16, 1965; the PNH won 35 seats, the PLH 29. The PLH charged the government with fraudulently manipulating the results, and some party leaders urged their supporters to boycott meetings of the assembly. The PLH was unable to agree on this tactic, and enough PLH members took their seats when the Congress convened on March 15 to provide the necessary quorum. The PNH delegates kept their promise and elected López Arellano as president for a new six-year term, from 1965 to 1971.

For a time, López Arellano had success in foreign affairs. One of his government's first acts had been to join with Guatemala and Nicaragua in establishing the Central American Defense Council (Consejo de Defensa Centroamericana--Condeca), which was a military pact among these Central American states and the United States for coordination of counterinsurgency activities. El Salvador joined shortly thereafter, and in 1965 Condeca held its first joint military exercise on the Caribbean coast of Honduras. That same year, Honduras contributed a small contingent of troops to the Organization of American States (OAS) forces monitoring the election in the Dominican Republic.

As the 1960s progressed, Honduras's relations with Nicaragua and with the United States improved, but increasing problems developed between Honduras and El Salvador. In May and June 1967, a series of incidents along the border aggravated tensions considerably. One incident involved the capture of two Salvadoran officers and thirty-nine enlisted men whose truck convoy had penetrated several kilometers into Honduras. The Salvadoran troops were finally returned over a year later, but the tensions continued to mount.

Data as of December 1993