The Greco-Turkish War had serious and lasting consequences. Two problems immediately faced Greece. The first was the establishment of a legitimate government, and the second was the need to cope with the flood of Greek refugees from the territory that had been lost.

The first problem was addressed quickly when a small, dedicated band of military officers formed a Revolutionary Committee in 1922. Under pro-Venizelos colonels Nikolaos Plastiras and Stilianos Gonatas, the committee landed 12,000 troops at Lavrion, south of Athens, and staged a coup. They demanded and received the resignation of the government and the abdication of King Constantine. George, Constantine's elder son (who had refused the crown when Constantine left in 1917), was crowned as king, and the coup leaders began purging royalists from the bureaucracy and the military.

The next step was to assign blame for the catastrophe. At a show trial, Dimitrios Gounaris, who had been prime minister at the beginning of the war, and seven of his government officials became national scapegoats when they were charged with high treason; six were executed, although their worst crime was incompetence. The executions increased the ferocity of the rift between Venizelists and anti-Venizelists, and the military became an independent political force.

The Plastiras government turned to Venizelos to negotiate an acceptable peace with Turkey. In the Treaty of Lausanne signed in 1923, Greece relinquished all territory in Asia Minor, eastern Thrace, and two small islands off Turkey's northwest coast. At Lausanne Greece and Turkey agreed to the largest single compulsory exchange of populations known to that time. All Muslims living in Greece, except for the Slavic Pomaks in Thrace and the Dodecanese, and Turkish Muslims in Thrace, were to be evacuated to Turkey; they numbered nearly 400,000. In return approximately 1,300,000 Greeks were expelled to Greece. The determining factor for this shift was religion, not language or culture. Also included in the treaty was protection of Orthodox Greeks and Muslims as religious minorities in Turkey and Greece, respectively.

The Treaty of Lausanne essentially established the boundaries of today's Greece, turning the country into an ethnically homogeneous state by removing almost all of the major minority group. It also ended once and for all the possibility of including more ethnic Greeks in the nation, the Megali Idea. And, by instantly increasing Greece's population by about 20 percent, Lausanne posed the huge problem of dealing with over 1 million destitute refugees.