As political and religious purges finally drew to a close, the international situation worsened. Fighting had broken out, in May 1939, with Japanese forces based in Manchukuo. That summer a Japanese army invaded eastern Mongolia. Soviet General Georgi Zhukov commanded the Soviet-Mongolian army that met this invasion. Between May and September 1939, there was large-scale ground and aerial fighting along the Khalkhyn Gol, a river in northeastern Mongolia. The Mongolian troops and their Soviet allies severely defeated the Japanese, who may have sustained as many as 80,000 casualties compared with 11,130 on the MongolianSoviet side. Hostilities ended on September 16, 1939. The Soviet Union and Japan signed a truce, and a commission was set up to define the Mongolian-Manchurian border. Although Japan did not invade again, it did mass large military forces along the Mongolian and the Soviet borders in the course of the war, while continuing its southward drive into China.

The Soviet position in Mongolia was now fully consolidated. Throughout World War II, Choybalsan followed Moscow's directives, and Mongolia supported the Soviet Union with livestock, raw materials, money, food, and military clothing. The Mongolian army was maintained intact throughout the war; it served as an important buffer force in the Soviet Far East defense system, but it did not actually join the Red Army. Moreover, the Soviets, on the occasion of the April 13, 1941, Soviet-Japanese Neutrality Pact, obtained a commitment from Japan to respect Mongolia's territorial integrity.

Modernizing the army and keeping it at peak mobilization was a heavy drain on the nation's undeveloped economy and small population. Even so, the party leaders pressed on with what limited social progress they could manage in a wartime situation. As more teachers became trained, literacy began to accelerate, and government efforts to assist the herdsmen in sheltering, feeding, and caring for their livestock continued. Stock raising bore the major war burden, however, and with large Soviet requisitions to fill, herd totals fell sharply during the war.

Mongolia's wartime neutrality ended in the closing days of World War II. On August 10, 1945, two days after the Soviet Union had declared war on Japan, Mongolia also declared war on Japan. The Mongolian army, some 80,000 strong, joined Soviet troops in invading Inner Mongolia and Manchuria. On August 14, 1945, in the Sino-Soviet Treaty of Friendship and Alliance, China agreed to recognize the independence of Mongolia within its "existing boundary," provided that a plebiscite confirmed the Mongolian people's desire for independence. Mongolia obliged, and in an October 20 referendum, 100 percent of the electorate voted for independence from China. On January 5, 1946, China recognized Mongolian independence and, on February 14, agreed to exchange diplomatic representatives. None, however, were exchanged. The ensuing Chinese civil war and the victory of the Chinese communists over the Guomindang government in 1949 led instead to Ulaanbaatar's recognition of the new People's Republic of China.

Data as of June 1989