On August 10, 1945, after the US dropped atomic bombs on Hiroshima and Nagasaki, Japan offered surrender in World War II. Soviet troops, part of the Allied forces, immediately began pouring into Korea. The US was appalled, and moved quickly to prevent all of Korea from becoming a Soviet satellite state. Dean Rusk, then a Colonel in the army, selected the 38th Parallel as the line that would divide the American- controlled sector from the Soviet-controlled sector. General Douglas MacArthur announced the division of the Korea into two occupation zones in "General Order Number One", which Stalin accepted. The US took control of South Korea, while the USSR controlled North Korea.
As US and USSR forces moved in, a coalition of Korean nationalists formed the Korean People's Republic (KPR) as an interim government. Over time, the KPR became increasingly communist, and, through a policy of encouraging peasant seizure of Japanese property, extremely popular. The Soviet recognized the KPR, while the US did not. Kim Il-Sung, a Korean guerrilla leader from the 1930s, emerged as the leader of the pro-Soviet KPR in North Korea.
In the south, Lt.-General John Reed Hodge, who had commanded XXIV Corps at Okinawa during World War II, oversaw the occupation of South Korea. Under Hodge, the American Military Government (AMG) became increasingly conservative. The AMG spokesperson was Syngman Rhee, a Korean nationalist just recently returned from a 33-year exile imposed by the Japanese. When, in 1946, Hodge decided to allow a free market in South Korea, speculators hoarded the rice, leading to high prices and famine. During this crisis, Hodge gave Rhee totalitarian powers. By September 1947, realizing that Korea was a political and social morass, Congress and the Joint Chiefs of Staff were suggesting the US should get out of Korea. To save face, the US turned the problem over to the UN, which proposed Korea-wide elections for March 31, 1948. Rhee's gangs and police helped rig the election and coerce people. Despite Communist protests, Rhee's party won in the south, and called itself the Republic of Korea. In Communist elections in the North, Kim Il-Sung won; immediately following his election, the North, rich in hydroelectric power sources, cut off power to the South.
By the late 1940s, the Cold War was heating up. In the summer of 1947, at Harvard commencement, General George C. Marshall announced the Marshall Plan for the economic recovery of West Germany. Germany and Berlin had already been split in two, occupied by American and Soviet forces, and more generally the US and USSR were contesting the political future of Europe, communist versus anti-communist. But after the Berlin Blockade and the formation of NATO, the Soviets began to look outside of Europe for places to expand. By 1949, the confrontation between the US and USSR escalated to another level: the Soviets had achieved the A-Bomb, setting off the arms race. Meanwhile, the United States was gearing up for even more adamant opposition of the Soviets based on the reasoning of NSC- 68, which portrayed communism as a monolithic, evil, and calculating enemy, and called for a huge American military buildup.
On October 1, 1949, Mao Zedong, having defeated Chiang Kai-Shek's nationalist forces, proclaimed the communist People's Republic of China (PRC). The news sent shock waves through the minds of American leaders. In an effort to make the PRC think of the US as a possible ally, the US abandoned Chang Kai-Shek and the Chinese nationalists on Formosa (now Taiwan). In a speech to the National Press Club, Dean Acheson, secretary of state for Truman, gave a speech on Asia, in which he mentioned that South Korea was not all that important to US security. According to his speech, keeping Japan anti-Communist was the most important part of America's Asian defense perimeter.
At the end of World War II, the US was not ready for occupation of Korea. It had no Korean language officers, and no Korea experts. When he arrived in south Korea, Lt.-General Hodge was forced to leave most of the Japanese bureaucracy in place because he had no one to replace them with. Ironically enough, at this early conflict in the escalating cold war, politeness ruled the day: the US asked the Soviets to stop at the 38th Parallel, and they did. Surprised by the Soviet acquiescence, American policymakers failed to realize that the USSR probably didn't want or care for more than the North, which was rich in minerals, hydroelectric power, and warm-water ports. Regardless, in 1945, the 38th Parallel was intended only as a temporary dividing line, not the permanent boundary it later became.