According to the Plan of Iguala, a provisional government was set up while an independent congress deliberated on the future of the nation. Congress was able to agree on two major issues: to cut the size of the Army of the Three Guarantees and to determine the eligibility of officials for the planned regency that eventually would replace the provisional government. As congress deliberated, Iturbide realized that power was slipping from his hands and decided to stage a dramatic demonstration on his behalf. On the evening of May 18, 1822, his troops were ordered to march through Mexico City in support of their commander. The demonstration by the Army of the Three Guarantees was joined by other soldiers and by the populace as it proceeded toward Iturbide's residence. "Long live Agustín I, Emperor of Mexico!" was the acclamation, at which Iturbide pretended surprise. The following day, congress named Iturbide as the constitutional emperor of Mexico. The arrangements for the coronation were pretentious but still in accord with Iturbide's understanding of the Mexican ethos. Iturbide recalled the importance of the monarchy in maintaining stability and control during the colonial period, and he decided to take full advantage of tradition.

The new empire faced serious economic problems. After the wars, the public coffers were empty, and the bureaucracy had grown. Modest tax adjustments were tried, but the results were meager. In congress, discontented factions sharply criticized the government, and Iturbide's recourse was to dissolve the legislative branch and to have all opposition delegates arrested in August 1822. In Veracruz, the commander of the garrison, Antonio López de Santa Anna Pérez de Lebrón, rose against Iturbide and proclaimed a republic on December 1, 1822. Santa Anna was quickly joined by other revolutionaries--including a disenchanted Vicente Guerrero, Nicolás Bravo, and Guadalupe Victoria. Together, they drew up the Plan of Casa Mata on February 1, 1823. By midmonth, Iturbide, realizing the failure of his efforts, abdicated the throne. Rebel forces encountered no opposition when they arrived in Mexico City. In July the United Provinces of Central America (consisting of Spanish-speaking Central America except for present-day Panama), which had been forcibly incorporated into the empire by Iturbide, declared their independence. (The province of Chiapas, belonging to the Captaincy General of Guatemala, opted to remain a part of Mexico.) The experience of an empire had failed, and the idea of a monarchical system for Mexico would be dismissed for four decades. Iturbide's excesses had worked to the benefit of the republicans.

Data as of June 1996