When John F. Kennedy won the 1960 U.S. presidential election, one major issue Kennedy raised was whether the Soviet space and missile programs had surpassed those of the United States. As Kennedy took over, despite warnings from Eisenhower about Laos and Vietnam, Europe and Latin America "loomed larger than Asia on his sights." In his inaugural address, Kennedy made the ambitious pledge to "pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and success of liberty."

In June 1961, John F. Kennedy bitterly disagreed with Soviet premier Nikita Khrushchev when they met in Vienna over key U.S.-Soviet issues. The legacy of the Korean War created the idea of a limited war.

Although Kennedy stressed long-range missile parity with the Soviets, he was also interested in using special forces for counterinsurgency warfare in Third World countries threatened by communist insurgencies. Although they were originally intended for use behind front lines after a conventional invasion of Europe, Kennedy believed that the guerrilla tactics employed by special forces such as the Green Berets would be effective in a "brush fire" war in Vietnam.

The Kennedy administration remained essentially committed to the Cold War foreign policy inherited from the Truman and Eisenhower administrations. In 1961, the USA had 50,000 troops based in Korea, and Kennedy faced a three-part crisis—the failure of the Bay of Pigs invasion, the construction of the Berlin Wall, and a negotiated settlement between the pro-Western government of Laos and the Pathet Lao communist movement These made Kennedy believe that another failure on the part of the United States to gain control and stop communist expansion would fatally damage U.S. credibility with its allies and his own reputation. Kennedy determined to "draw a line in the sand" and prevent a communist victory in Vietnam, saying, "Now we have a problem making our power credible and Vietnam looks like the place", to James Reston of The New York Times immediately after meeting Khrushchev in Vienna.

In May 1961, Vice President Lyndon B. Johnson visited Saigon and enthusiastically declared Diem the "Winston Churchill of Asia." Asked why he had made the comment, Johnson replied, "Diem's the only boy we got out there." Johnson assured Diem of more aid in molding a fighting force that could resist the communists.

Kennedy's policy toward South Vietnam rested on the assumption that Diem and his forces must ultimately defeat the guerrillas on their own. He was against the deployment of American combat troops and observed that "to introduce U.S. forces in large numbers there today, while it might have an initially favorable military impact, would almost certainly lead to adverse political and, in the long run, adverse military consequences."

The quality of the South Vietnamese military, however, remained poor. Bad leadership, corruption, and political promotions all played a part in emasculating the Army of the Republic of Vietnam (ARVN). The frequency of guerrilla attacks rose as the insurgency gathered steam. While Hanoi's support for the NLF played a role, South Vietnamese governmental incompetence was at the core of the crisis.

Kennedy advisers Maxwell Taylor and Walt Rostow recommended that U.S. troops be sent to South Vietnam disguised as flood relief workers. Kennedy rejected the idea but increased military assistance yet again. In April 1962, John Kenneth Galbraith warned Kennedy of the "danger we shall replace the French as a colonial force in the area and bleed as the French did." By 1963, there were 16,000 American military personnel in South Vietnam, up from Eisenhower's 900 advisors.

The Strategic Hamlet Program had been initiated in 1961. This joint U.S.-South Vietnamese program attempted to resettle the rural population into fortified camps. The aim was to isolate the population from the insurgents, provide education and health care, and strengthen the government's hold over the countryside. The Strategic Hamlets, however, were quickly infiltrated by the guerrillas. The peasants resented being uprooted from their ancestral villages. In part, this was because Colonel Pham Ngoc Thao, a Diem favourite who was instrumental in running the program, was in fact a communist agent who used his Catholicism to gain influential posts and damage the ROV from the inside.

The government refused to undertake land reform, which left farmers paying high rents to a few wealthy landlords. Corruption dogged the program and intensified opposition.

On July 23, 1962, fourteen nations, including the People's Republic of China, South Vietnam, the Soviet Union, North Vietnam and the United States, signed an agreement promising the neutrality of Laos.

Coup and assassinations

The inept performance of the South Vietnamese army was exemplified by failed actions such as the Battle of Ap Bac on January 2, 1963, in which a small band of Viet Cong beat off a much larger and better equipped South Vietnamese force, many of whose officers seemed reluctant even to engage in combat. The ARVN were led in that battle by Diem's most trusted General Huynh Van Cao, commander of the IV Corps, and a Catholic who had been promoted due to religion and fidelity rather than skill, and whose main job was to preserve his forces to stave off coups; Cao had earlier vomited during a communist attack. Some policymakers in Washington began to conclude that Diem was incapable of defeating the communists and might even make a deal with Ho Chi Minh. He seemed concerned only with fending off coups, and had become more paranoid after attempts in 1960, 1962, which he partly attributed to U.S. encouragement. As Robert F. Kennedy noted, "Diem wouldn't make even the slightest concessions. He was difficult to reason with."

Discontent with Diem's policies exploded following the Huế Vesak shootings of majority Buddhists who were protesting against the ban on the Buddhist flag on Vesak, the Buddha's birthday. This resulted in mass protests against discriminatory policies that gave privileges to the Catholic Church and its adherents. Diem's elder brother Ngo Dinh Thuc was the Archbishop of Huế and aggressively blurred the separation between church and state. Thuc's anniversary celebrations shortly before Vesak had been bankrolled by the government and Vatican flags were displayed prominently. There had also been reports of Buddhist pagodas being demolished by Catholic paramilitaries throughout Diem's rule. Diem refused to make concessions to the Buddhist majority or take responsibility for the deaths. On August 21, 1963, the ARVN Special Forces of Colonel Le Quang Tung, loyal to Diem's younger brother Ngo Dinh Nhu, raided pagodas across Vietnam, causing widespread damage and destruction and leaving a death toll estimated to range into the hundreds.

U.S. officials began discussing the possibility of a regime change during the middle of 1963. The United States Department of State was generally in favor of encouraging a coup, while the Defense Department favored Diem.

Chief among the proposed changes was the removal of Diem's younger brother Nhu, who controlled the secret police and special forces was seen as the man behind the Buddhist repression and more generally the architect of the Ngo family's rule. This proposal was conveyed to the U.S. embassy in Saigon in Cable 243.

The CIA was in contact with generals planning to remove Diem. They were told that the United States would not oppose such a move nor punish the generals by cutting off aid. President Diem was overthrown and executed, along with his brother, on November 2, 1963. When he was informed, Maxwell Taylor remembered that Kennedy "rushed from the room with a look of shock and dismay on his face." He had not approved Diem's murder. The U.S. ambassador to South Vietnam, Henry Cabot Lodge, invited the coup leaders to the embassy and congratulated them. Ambassador Lodge informed Kennedy that "the prospects now are for a shorter war".

Following the coup, chaos ensued. Hanoi took advantage of the situation and increased its support for the guerrillas. South Vietnam entered a period of extreme political instability, as one military government toppled another in quick succession. Increasingly, each new regime was viewed as a puppet of the Americans; whatever the failings of Diem, his credentials as a nationalist (as Robert McNamara later reflected) had been impeccable.

U.S military advisers were embedded at every level of the South Vietnamese armed forces. They were, however, almost completely ignorant of the political nature of the insurgency. The insurgency was a political power struggle, in which military engagements were not the main goal. The Kennedy administration sought to refocus U.S. efforts on pacification and "winning over the hearts and minds" of the population. The military leadership in Washington, however, was hostile to any role for U.S. advisers other than conventional troop training. General Paul Harkins, the commander of U.S. forces in South Vietnam, confidently predicted victory by Christmas 1963. The CIA was less optimistic, however, warning that "the Viet Cong by and large retain de facto control of much of the countryside and have steadily increased the overall intensity of the effort".

Paramilitary officers from the CIA's Special Activities Division trained and led Hmong tribesmen in Laos and into Vietnam. The indigenous forces numbered in the tens of thousands and they conducted direct action missions, led by paramilitary officers, against the Communist Pathet Lao forces and their North Vietnamese supporters. The CIA also ran the Phoenix Program and participation MAC-V SOG (Studies and Observations Group), which was originally named the Special Operations Group, but was changed for cover purposes.