Collins, like many of the other participants, was arrested, almost executed. He was imprisoned at Frongoch internment camp. Collins became one of the leading figures in Sinn Féin after the Rising. This was a small nationalist party which the British government and the Irish media mistakenly accredited the Rising to. By October 1917, Collins had become a member of the executive of Sinn Féin and Director of Organisation of the Irish Volunteers. Éamon de Valera was president of both organisations.
Collins was nominated in the 1918 general election to elect Irish MPs to the British House of Commons in London. Collins won for Sinn Féin, becoming MP for Cork South. However, unlike their rivals in the Irish Parliamentary Party, Sinn Féin MPs had announced that they would not take their seats in Westminster, but instead would set up an Irish Parliament in Dublin.
That new parliament, called "Dáil Éireann" (meaning "Assembly of Ireland") met in the Mansion House, Dublin in January 1919, although De Valera and leading Sinn Féin MPs had been arrested.
In de Valera's absence, Cathal Brugha was elected Príomh Aire ('Main' or 'Prime', Minister', but often translated as 'President of Dáil Éireann'). He was replaced by de Valera, when Collins helped him escape from Lincoln Prison in April 1919.
The Irish War of Independence began on the same day that the First Dáil met on 21 January 1919. An ambush party of IRA volunteers acting without orders and led by Seán Treacy attacked a group of Royal Irish Constabulary men. They were escorting a shipment of gelignite to a quarry in Soloheadbeg, County Tipperary. Two policemen were shot dead during the fight. This incident is considered to be the first action taken in the Irish War of Independence.
In 1919, Collins had a number of roles. In the summer he was elected president of the IRB, Director of Intelligence of the Irish Republican Army. He also became the Minister for Finance. His ministry was able to organise a large bond issue in the form of a "National Loan" to fund the new Irish Republic. Collins and Richard Mulcahy were the two main organisers for the Irish Republican Army, in as far as it was possible to direct the actions of disorganised guerrilla units.
In 1920, the British offered a prize of £10,000 (equivalent to GB£474,000.00 / €535,026.83 in 2017) for information leading to the capture or death of Collins. His fame had so transcended the IRA movement that he was nicknamed "The Big Fellow".
In July 1921, the British suddenly offered a truce. Arrangements were made for a conference between the British government and the leaders of the as-yet unrecognised Irish Republic.
In August 1921, Eamonn de Valera made the Dáil upgrade his office from Prime Minister to President of the Irish Republic. This made him on the same level as George V in the negotiations. Eventually, however, he said that as the King would not attend, then neither would he. Instead, with the reluctant agreement of his cabinet, de Valera assembled a team of delegates to go in his place. The team was headed by Vice-President Arthur Griffith with Collins as Deputy.
The negotiations resulted in the Anglo-Irish Treaty which was signed on 6 December 1921. In it, a new state was agreed upon, called the "Irish Free State". The agreement made an all-Ireland state possible. The six-county region in the northeast could opt out of the Free State if they wanted to. If this happened, an Irish Boundary Commission was to redraw the Irish border. The Irish Free State was established in December 1922, and as expected, Northern Ireland opted to remain part of the United Kingdom proper.
Although it was not the republic he was fighting for, Collins concluded that the Treaty offered Ireland "the freedom to achieve freedom." He knew that the treaty, and in particular the issue of partition, would not be popular in Ireland. When he signed the treaty, he said "I have signed my own death warrant."
Sinn Féin split over the treaty, and the Dáil debated the matter bitterly for ten days until it was approved by a vote of 64 to 57. The Supreme Council of the IRB, which was informed in detail about the Treaty negotiations voted unanimously ("without exceptions") to accept the Treaty. The only exception was the later COS of the IRA Liam Lynch.
As expected, the Treaty was extremely controversial in Ireland.
First, Éamon de Valera, President of the Irish Republic until 9 January, had been unhappy that Collins had signed any deal without his and his cabinet's authorisation.
Second, the contents of the Treaty were bitterly disputed. De Valera and many other members of the republican movement did not want Ireland to be a dominion of the British Empire. They did not like the "symbolism" of having to give a statement of faithfulness to the British king.
The dividing of Ireland between the Irish Free State and Northern Ireland was not as controversial. One of the main reasons for this was that Collins was secretly planning to launch a guerrilla war against the Northern State. In the early months of 1922, he had sent IRA units to the border, and arms and money to the northern units. In May–June 1922, he and IRA Chief of Staff Liam Lynch organised an attack of both pro- and anti-treaty IRA units along the new border. This offensive was officially called off under British pressure on 3 June and Collins issued a statement that "no troops from the 26 counties, either those under official control [pro-treaty] or those attached to the [IRA] Executive [anti-treaty] should be permitted to invade the six county area."
The new Provisional Government () was formed under Collins, who became "President of the Provisional Government of Southern Ireland" (i.e., Prime Minister). He also remained Minister for Finance of Griffith's republican administration after de Valera stepped down.
In the months leading up to the outbreak of civil war in June 1922, Collins tried to heal the split in the nationalist movement and prevent civil war. De Valera, having opposed the Treaty in the Dáil, withdrew from the assembly with his supporters. Collins secured a compromise, "The Collins/De Valera Pact", whereby the two factions of Sinn Féin, pro- and anti-Treaty, would fight the soon-to-be Free State's first election jointly and form a coalition government afterwards. This Pact was agreed without Griffith's knowledge and he opposed it as a potential betrayal of the Treaty. For a time it appeared that a split would occur in the pro-Treaty ranks but Griffith relented realizing that Collins held all the power. His friendship with Collins did not survive. [ANTHONY J. JORDAN IN "ARTHUR GRIFFITH with James Joyce & WB Yeats - Liberating Ireland". Westport Books. pp. 173–5 & 188-189.]
To try and find a compromise, Collins proposed that the Free State would have a republican constitution, with no mention of the British king. However, the British did not sign the proposed republican constitution. They argued they had signed the Treaty in good faith and its terms could not be changed so quickly.
On 14 April 1922, a group of 200 anti-Treaty IRA men occupied the Four Courts in Dublin in defiance of the Provisional government. Collins, who wanted to avoid civil war at all costs, did not attack them until June 1922, when British pressure also forced his hand. After a final attempt to persuade the men to leave, Collins borrowed two 18 pounder artillery pieces from the British and bombarded the Four Courts until the men surrendered.
This led to the Irish Civil War as fighting broke out in Dublin between the anti-Treaty IRA and the provisional government's troops.
Under Collins' supervision, the Free State rapidly took control of the capital. In July 1922, anti-Treaty forces held the southern province of Munster and several other areas of the country. De Valera and the other anti-Treaty TDs supported the anti-Treaty IRA.