Although the Congress claimed to represent all Indians, many Muslims, fearful of the vast Hindu majority, began to withdraw from the Congress. The Congress was divided on approaches to economic reform; the conservatives favored cautious reform while the leftists, of which Jawaharlal Nehru was a leader, urged socialism. The great strength of the organization was shown in the provincial elections of 1937.

At the outbreak of World War II, the Congress voted for neutrality. When India came under Japanese attack, the Congress demanded immediate concessions from Great Britain toward a democratic government in return for cooperation in the war effort. The British responded by outlawing the organization and arresting its leaders. In the 1946 elections to the Indian constituent assembly, the Congress lost the Muslim vote to the Muslim League; it reluctantly accepted the partition of the Indian subcontinent and the formation of the state of Pakistan.

After partition the Congress, as the largest party, governed India under Nehru's leadership. The Congress successfully adjusted to its new role as a political party and won the majority of the seats in the next election. It retained this support into the 1960s. After Nehru's death, the party began to lose support. The leadership of Nehru's daughter, Indira Gandhi, who became prime minister in 1966, was challenged by a powerful right-wing group within the Congress, and in 1969 the party formally split into two factions; one led by Morarji Desai, the other (New Congress) by Indira Gandhi.

In the 1971 national elections and the 1972 state elections Gandhi's faction won strong victories, but, in a reaction against her emergency rule, it lost the election of 1977. It was the first time the Congress had lost government control since independence. Gandhi (now with a new faction, Congress Indira) returned to power in the 1980 elections, called when the opposition coalition disintegrated.

After her assassination (1984), her son Rajiv Gandhi succeeded to the leadership. Although he led Congress to reelection in 1984, the party was defeated in 1989 because of scandals and became the major opposition party. Following the assassination of Rajiv Gandhi during the 1991 election campaign, P. V. Narasimha Rao became head of the party and, after Congress won a plurality in parliament later that year, prime minister. In 1996 scandal again led voters to reject Congress at the polls, but Rao remained party leader. Leadership soon passed to the ineffectual Sitaram Kesri, but in 1998 Rajiv Gandhi's widow, Sonia Gandhi, a political newcomer, was elected head of Congress and had some success in rebuilding party support among Muslims and the poor. Congress nonetheless did poorly in the 1999 elections. In 2004, however, Congress returned to power, but the foreign-born Gandhi declined to lead the new coalition government; Manmohan Singh, a former finance minister, became prime minister; the party remained in power, with a larger plurality, after the 2009 elections.