The elections of January 1936, which the Populists hoped would finally legitimize their position, instead brought another deadlock between the Populists and the Liberals. This time, however, the political balance was even more precarious because the fifteen votes won by the Communist Party (Kommunistikon Komma Ellados--KKE) gave it the power to swing ballots in parliament.

In this atmosphere, General Ioannis Metaxas emerged as a political force. Metaxas, always a foe of Venizelos and a participant in several coup attempts, had been a minor character on the extreme right of the Greek political spectrum in the 1920s. During that time he had cultivated a close relationship with the royal house. After his return to the throne in 1935, King George searched frantically for an anticommunist political leader strong enough to bind together a working coalition and control the leftist factions but not strong enough to lead a coup against the throne. The search led the king first to appoint Metaxas minister of war and then prime minister, whereupon Metaxas immediately pressured parliament into a five-month adjournment.

In May 1936, labor unrest and massive strikes cast doubt on the government's ability to maintain public order. Metaxas used the opportunity to declare a state of emergency, dissolve parliament for an indefinite period, and suspend human rights articles of the constitution. These actions, conducted in August, made Metaxas dictator of Greece. He modeled his regime on the fascist governments of Adolf Hitler and Benito Mussolini. Political parties and trade unions were abolished, strikes became illegal, political opponents were arrested, and press censorship prevailed. Metaxas sought to reduce labor unrest by raising wages and improving working conditions in industry and by raising agricultural prices and absorbing farmers' debts. By 1938 per capita income had increased drastically, and unemployment was dropping. Metaxas dismantled the old patronage system based on royalist and Venizelist party loyalties. Ironically, by sweeping away political parties the rightist dictatorship created a political vacuum in which the constituency of the Greek leftists, especially the communists, grew larger.

Metaxas's "Third Hellenic Civilization" (the first being ancient Greece and the second the Byzantine Empire) lacked the broad base of popular support enjoyed by the dictatorships of Hitler and Mussolini--Greek fascism was not a mass movement, nor was it based on a coherent ideology or racist dogma. In general, the Greek public neither supported nor actively resisted the authoritarian paternalism of Metaxas.