The New Fourth Army Incident occurred during the Sino-Japanese War (1937-1945), during which the Chinese Civil War was in theory suspended, uniting the Communists and Nationalists against the Japanese. It is significant as the end of real cooperation between the nationalists and communists.

Today, Taiwanese and Chinese historians view the New Fourth Army Incident differently. For the Taiwanese it is an example of communist treachery, for the Chinese it is an example of nationalist treachery.

In the fall of 1940, when the communist New Fourth Army attacked nationalist forces under Han Deqin. Benton's book New Fourth Army argues the communist attack was a counterattack, a response to an initial attack by Han Deqin , and that this initial attack was the result of Chen Yi's goading and harassment of nationalist forces. Regardless, the conflict led to heavy losses for the nationalists.

For Chinese historians the incident began in December, 1940, when Chiang Kai-shek demanded the withdrawal of the New Fourth Army from Anhui and Jiangsu. The New Fourth Army commanders complied, but even so they were ambushed by nationalist troops on January 7, 1941, leading to heavy losses in fighting that lasted until January 13. Ye Ting was detained and Xiang Ying killed. Chiang Kai-shek ordered the New Fourth Army disbanded on January 17. However, on January 20, the Chinese Communist Party in Yan'an ordered the reorganization of the army. Chen Yi was the new army commander. Liu Shaoqi was the political commissar. The new headquarters was in Jiangsu, which was the general headquarters for the New Fourth Army and the Eighth Route Army. Together, they comprised seven divisions and one independent brigade, totalling over ninety thousand troops.

The New Fourth Army, the Eighth Route Army, and other troops led by the CCP were incorporated into the People’s Liberation Army in June, 1946.