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He was born to Gongsun Kang, Governor of Liaodong, Xuantu , Lelang and Daifang commanderies. After Kang's death, his brother Gong took over the position in 221, but revealed his inability to rule. In 228, Yuan wrested the position.
At that time, China was split into Three Kingdoms. The Kingdom of Wei in the north and Kingdom of Wu in the south made efforts in bringing over the powerful warlord, but his indecisiveness eventually annihilated himself. Although Gongsun Yuan was nominally subject to Wei, Sun Quan, King of Wu, aggressively worked on him. Yuan considered switching sides to Wu until he yield under the pressure of Emperor Ming of Wei. Yuan killed Wu delegates, but some of them fled to Goguryeo, who was suffred from constant pressure from the Gongsun family. Then Wu allied with Goguryeo to launch a pincer attack against Yuan. However, Goguryeo was nervous about the risk and killed Wu delegates.
Feeling a sense of crisis, Emperor Ming decided to overthrow the Gongsun family. In 237, he dispatched Wuqiu Jian with Chinese, Wuhuan and Xianbei troops, but the campaign was aborted due to floods. Gongsun Yuan proclaimed himself as the King of Yan (燕) and concluded an alliance with Wu. In the next year, Sima Yi and Wuqui Jian attacked Liaodong again. As a result of the campaign, Gongsun Yuan was killed and the Gongsun family was exterminated. The Kingdom of Wei conquered Liaodong and northwestern Korea.
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