On April 13, 1939, France and Britain pledged to ensure the independence of Romania, but negotiations on a similar Soviet guarantee collapsed when Romania refused to allow the Red Army to cross its frontiers. On August 23, 1939, the Soviet Union and Nazi Germany signed a nonaggression pact containing a secret protocol giving the Soviet Union the Balkans as its sphere of influence. Freed of any Soviet threat, Germany invaded Poland on September 1 and ignited World War II. The Nazi-Soviet pact and Germany's three-week blitzkrieg against Poland panicked Romania, which granted refuge to members of Poland's fleeing government. Romania's premier, Armand Calinescu, proclaimed neutrality, but Iron Guards assassinated him on September 21. King Carol tried to maintain neutrality for several months more, but France's surrender and Britain's retreat from Europe rendered meaningless their assurances to Romania, and therefore Carol needed to strike a deal with Hitler.

Romania suffered three radical dismemberments in the first year of the war that tore away some 100,000 square kilometers of territory and 4 million people. On June 26, 1940, the Soviet Union gave Romania a twenty-four-hour ultimatum to return Bessarabia and cede northern Bukovina, which had never been a part of Russia; after Germany's ambassador in Bucharest advised Carol to submit, the king had no other option. In August Bulgaria reclaimed southern Dobruja with German and Soviet backing. In the same month, the German and Italian foreign ministers met with Romanian diplomats in Vienna and presented them with an ultimatum to accept the retrocession of northern Transylvania to Hungary; Carol again conceded. These territorial losses shattered the underpinnings of Carol's power. On September 6, 1940, the Iron Guard, with the support of Germany and renegade military officers led by the premier, General Ion Antonescu, forced the king to abdicate. Carol and his mistress again went into exile, leaving the king's nineteen-year-old son, Michael V (1940-47), to succeed him.

Antonescu soon usurped Michael's authority and brought Romania squarely into the German camp. His new government quickly enacted stricter anti-Semitic laws and restrictions on Jewish, Greek, and Armenian businessmen; widespread bribery of poor and corrupt Romanian officials, however, somewhat mitigated their harshness. With Antonescu's blessing, the Iron Guard unleashed a reign of terror. In November 1940, Iron Guards thirsty for vengeance broke into the Jilava prison and butchered sixty-four prominent associates of King Carol on the same spot where Codreanu had been shot. They also massacred Jews and tortured and murdered Nicolae Iorga. Nazi troops, who began crossing into Romania on October 8, soon numbered over 500,000; and on November 23 Romania joined the Axis Powers. Hitler now cast Romania in the role of regular supplier of fuel and food to the Nazi armies. Because the Iron Guard's disruptive violence no longer served Hitler's ends, German and Romanian soldiers began rounding up and disarming ill-disciplined members. In January 1941, however, the Iron Guard rebelled and street battles erupted. During this fighting, Iron Guards murdered 120 helpless Jews and mutilated their bodies. German and Romanian troops finally crushed the Iron Guard after several weeks.

On June 22, 1941, German armies with Romanian support attacked the Soviet Union. German and Romanian units conquered Bessarabia, Odessa, and Sevastopol, then marched eastward across the Russian steppes toward Stalingrad. Romania welcomed the war. In a morbid competition with Hungary to curry Hitler's favor and hoping to regain northern Transylvania, Romania mustered more combat troops for the Nazi war effort than all of Germany's other allies combined. Hitler rewarded Romania's loyalty by returning Bessarabia and northern Bukovina and by allowing Romania to annex Soviet lands immediately east of the Dniester, including Odessa. Romanian jingoes in Odessa even distributed a geography showing that the Dacians had inhabited most of southern Russia.

During the war, Antonescu's regime severely oppressed the Jews in Romania and the conquered territories. In Moldavia, Bukovina, and Bessarabia, Romanian soldiers carried out brutal pogroms. Troops herded at least 200,000 Jews from Bukovina and Bessarabia--who were considered Soviet traitors--across the Dniester and into miserable concentration camps where many starved or died of disease or brutality. During the war, about 260,000 Jews were killed in Bessarabia, Bukovina, and in the camps across the Dniester; Hungary's Nazi government killed or deported about 120,000 of Transylvania's 150,000 Jews in 1944. Despite rampant anti-Semitism, most Romanian Jews survived the war. Germany planned mass deportations of Jews from Romania, but Antonescu balked. Jews acted as key managers in Romania's economy, and Antonescu feared that deporting them en masse would lead to chaos; in addition, the unceasing personal appeals of Wilhelm Filderman, a Jewish leader and former classmate of Antonescu, may have made a crucial difference.

Romania supplied the Nazi war effort with oil, grain, and industrial products, but Germany was reluctant to pay for the deliveries either in goods or gold. As a result, inflation skyrocketed in Romania, and even government officials began grumbling about German exploitation. Romanian-Hungarian animosities also undermined the alliance with Germany. Antonescu's government considered war with Hungary over Transylvania an inevitability after the expected final victory over the Soviet Union. In February 1943, however, the Red Army decimated Romania's forces in the great counteroffensive at Stalingrad, and the German and Romanian armies began their retreat westward. Allied bombardment slowed Romania's industries in 1943 and 1944 before Soviet occupation disrupted transportation flows and curtailed economic activity altogether.

Data as of July 1989