Italy had two things going in its favor for the postwar settlement. Firstly, the military invasion and occupation of the Italian peninsula was accomplished by the Western Allies. The Anglo-American occupation regimens were more than willing to rely upon local partners, often drawing from existing liberal and conservative political factions that had been sidelined by fascism and were often staunchly anticommunist. The USSR, in contrast, tended to rely upon cadres of its own creation drawn from the various Communist Parties. This meant that there was a degree of continuity between the bureaucracy and political leadership in the postwar period and the postwar government in Italy did not suffer the political trauma of a complete political break from the past. Secondly, by overthrowing Mussolini and fighting the Axis as co-belligerents, Italy was able to have a degree of political leeway in the postwar settlement as late partner to the United Nations' cause. The 1947 Peace Treaty- PDF warning's Preamble placed the onus for Italy's role in the Axis upon the Fascist state and averred that:

Whereas after the said armistice Italian armed forces, both of the Government and of the Resistance Movement, took an active part the war against Germany, and Italy declared war on Germany as October 13,1943, and thereby became a co-belligerent against Germany.

All of this ensured that the Allied military government in Italy would be relatively brief and sovereignty returned to Italy relatively quickly. Postwar purging of Fascists from Italian government was largely carried out by the Italians themselves, and the purge's results were meager and quite half-hearted, with both the judiciary and police heads appointed by Mussolini, for example, retaining their posts. Both the Italian postwar governments and the Anglo-American military governments were more interested in restoring order and setting Italy up for the Cold War than any political house-cleaning of creatures of the former regime.

This is not to say that Italy emerged from the war politically unscathed or unchanged. The Italians had forfeited their rights to a colonial empire by virtue of Mussolini's aggression and one component of the 1947 Treaty was Italian forfeiture of all claims to their colonies in Africa and concessions in Asia. Part IV of the Treaty demanded that Italy defortify its frontiers with France and Yugoslavia and deploy no weapons that could reach into these areas. Italian islands like Pantellaria had to be completely demilitarized. Both the Italian Air Force and the Army were limited to two hundred planes and tanks. Furthermore, the Army was limited to 250,000 men and the Navy could not acquire new ships until after 1950 and then could not build heavy units like battleships or aircraft carriers. The Allies also forbid Italy from developing either nuclear or guided missile technology. These limitations on Italian armed forces were eventually repealed with Italy's joining of NATO in 1949 as Italy emerged as an important component of NATO's southern flank.

Domestically, the memories of the war and Fascist period imparted to Italian politics a highly divisive and partisan character despite calls to return to normalcy. Although the royal House of Savoy tried to portray itself as instrumental in the downfall of Mussolini, a 1946 referendum declared Italy to be a republic and formally ended the monarchy in Italy. In contrast to West Germany where Adenauer and the CDU managed to transition Germany into a relatively stable electoral polity that sidelined both right-wing extremists and the KPD, Italian electoral politics were often quite volatile and fractious. The Communist Party of Italy (PCI) under the leadership of Palmiro Togliatti managed to gain significant inroads into the Italian electorate in the immediate postwar years. Although factionalism within the PCI, covert support from the US and overt support from the Catholic Church managed to limit the power of PCI in the postwar period, both Communism and various left-wing ideas emerged as powerful intellectual currents in postwar Italian society and culture. Italian Marxist thinkers like Antonio Gramsci became globally significant figures in the realm of ideas and the PCI evolved into a champion of what would later be termed Eurocommunism in the 1970s. In the realm of cinema, the Italian neorealist movement sought to craft an aesthetic in films like The Bicycle Thief and Umberto D that sought to humanize the plight of the common man and indict the vagaries of the capitalist system. The neorealists itself was a cinematic movement done in direct aesthetic opposition to Fascist cinema whose "white telephone" movies often featured wealthy Italians dealing with superficial problems. One of the legacies of the neorealist movement was the vibrant Italian cinema of the 1960s whose auteurs like Bernardo Bertolucci and Federico Fellini sought to satirize and undermine the shallow precepts that underlay the Italian society of the postwar economic miracle. These auteurs would occasionally use cinema in films like Amarcord and The Conformist as a vehicle to explain the rise of Fascism and indict the establishment for allowing thugs like the Blackshirts to reign.

So even though the discrepancy between Mussolini's aims and his ability to achieve them meant he appeared as only a secondary, almost clownish, figure in the defeat of the Axis in Western historical memory, the the Fascist period did have wider ramifications both in Italy's wider geopolitical status and in the contentious domestic politics of the peninsula.