In June 1996, the Government finally made their move. Another National Congress was held in Medan, where Megawati was not invited to come along and attended by anti-Megawati members. With the Government's backing, Suryadi, a former Chairperson was re-elected as PDI's Chairperson. Megawati refused to acknowledge the results of this congress and continued to see herself as the rightful leader of PDI.
Suryadi began threatening to take back PDI's Headquarters in Jakarta. This threat came true during the morning of 27th July 1996 .That morning, Suryadi's supporters (reportedly with the Government's backing) attacked the PDI Headquarters and faced resistance from Megawati supporters who had been stationed there ever since the National Congress in Medan. In the ensuing fight, Megawati's supporters managed to hold on to the headquarters.
A riot then ensued, followed by a crackdown by the Government. The Government would later blame the riots on the People's Democracy Party (PRD).
Despite being overthrown as Chairperson by Suryadi and the Government, the event made Megawati famous, giving her figure both sympathy and popularity.
PDI was now divided into two factions, Megawati's faction and Suryadi's faction. Megawati's faction had wanted to participate in the 1997 Legislative Elections, but the Government only recognized Suryadi's faction. In the 1997 Legislative Elections, Megawati and her supporters threw their support behind the United Development Party leaving PDI to languish with only 3% of the votes.
In October 1998, after Suharto's fall, Megawati declared the formation of PDI-P, adding the suffix perjuangan (struggle) to differentiate her faction of PDI from the Government backed one. Megawati was also elected as the Chairperson of PDI-P as well as being nominated for President in 1999.
The Presidency looked set to be contested by Megawati and the then incumbent BJ Habibie of Golkar who was looking for a second term. However, MPR Chairman Amien Rais had other ideas as he formed a coalition called the Central Axis which consisted of Muslim Parties. Amien also announced that he would like to nominate Wahid as President. PKB, their alliance with PDI-P never cemented, now moved over to the Central Axis. Golkar then joined this coalition after Habibie's accountability speech was rejected and he withdrew from the race.
It finally came down to Megawati and Wahid. Wahid, with a powerful coalition backing him was elected as Indonesia's 4th President with 373 votes to Megawati's 313.
The PDI-P supporters were outraged. As the winners of the Legislative Elections, they expected to win the Presidential Elections also. PDI-P masses began rioting in cities such as Jakarta, Solo and Medan. The normally peaceful Bali was also involved in pro-Megawati protests. Wahid then realized that there was a need to recognize PDI-P's status as the winners of the Legislative Elections. With that, he encouraged Megawati to run for the Vice Presidency.
Megawati rejected this offer when she saw that she had to face opponents such as United Development Party's (PPP) Hamzah Haz and Golkar's Akbar Tanjung and Wiranto. After some politicking by Wahid, Akbar and Wiranto withdrew from the race. Wahid also ordered PKB to throw their weight behind Megawati. Megawati was now confident and competed in the Vice Presidential elections. She was elected as Vice President with 396 votes to Hamzah's 284.
The Congress was noted as one where Megawati consolidated her position within PDI-P by taking harsh measures to remove potential rivals . During the election for the Chairperson, two other candidates emerged in the form of Eros Djarot and Dimyati Hartono. Both Eros and Dimyati ran for the Chairpersonship because they did not want Megawati to hold the PDI-P Chairpersonship while concurrently being Vice President.
For Eros, when finally received his nomination from the South Jakarta branch, membership problems arose and made his nomination void. Eros was then not allowed to go and participate in the congress. Disillusioned with what he perceived to be a cult of personality developing around Megawati, Eros left PDI-P. In July 2002, he would form the Freedom Bull National Party.
For Dimyati, although his candidacy was not opposed as harshly as Djarot's, he was removed from his position as Head of PDI-P's Central Branch. He kept his position as a People's Representative Council (DPR) member but retired in February 2002. In April 2002, Dimyati formed the Our Homeland of Indonesia Party (PITA).
The relationship improved somewhat when later in the year, Wahid authorized Megawati as the Vice President to manage the day-to-day running of the Government. However, Megawati and PDI-P had slowly but surely started to distance themselves from Wahid and join forces with the Central Axis. Finally, in July 2001 at a Special Session of the MPR, Wahid was removed as President. Megawati was then elected as President to replace him with Hamzah as her Vice President.
Two of these members were Megawati's own sisters. In May 2002, Sukmawati Sukarnoputri formed the Indonesian National Party Marhaenism (PNI-Marhaenisme). This was followed in November 2002, with Rachmawati Sukarnoputri declaring the formation of the Pioneers' Party (PP).
Many running mates were considered, including Hamzah Haz (To renew their partnership from), Susilo Bambang Yudhoyono, and Jusuf Kalla. Finally, Megawati elected Nahdatul Ulama Chairman Hasyim Muzadi as her running mate. It was expected that Megawati would appeal to Nationalist sentiments while Hasyim would appeal to Islamist ones. In the first round of elections, Megawati/Hasyim came second to Yudhoyono/Kalla.
To improve Megawati's chances in the run-off, PDI-P, formed a coalition with PPP, Golkar, Reform Star Party (PBR) and Prosperous Peace Party (PDS) in August 2004. However Megawati/Hasyim was convincingly beaten in the run-off against Yudhoyono/Kalla.
The National Coalition then turned their eyes on being oppositions for the Yudhoyono/Kalla Government in DPR. With Kalla's election as Chairman of Golkar, Golkar defected onto the Government's side, leaving PDI-P as the only major opposition party in the DPR.
This congress was noted for the formation of a faction called the Renewal of PDI-P Movement. This movement called for a renewal of the Party leadership if it is to win the 2009 Legislative Elections. Although they attended the Congress, the members of the Renewal of the PDI-P movement left once Megawati was re-elected. In December 2005, these same members would form the Democratic Renewal Party (PDR).