On September 7, 1977, U.S. President Jimmy Carter and the de facto leader of Panama, General Omar Torrijos, signed Torrijos–Carter Treaties, which set in motion the process of handing over the Panama Canal to Panamanian control by 2000. Although the canal was destined for Panamanian administration, the military bases remained and one condition of the transfer was that the canal would remain open for American shipping. The U.S. had long-standing relations with General Noriega, who served as a U.S. intelligence asset and paid informant of the Central Intelligence Agency from 1967, including the period when Bush was head of the CIA (1976–77).

In March 1988, Noriega's forces resisted an attempted coup against the government of Panama. As relations continued to deteriorate, Noriega appeared to shift his Cold War allegiance towards the Soviet bloc, soliciting and receiving military aid from Cuba, Nicaragua, and Libya. American military planners began preparing contingency plans to invade Panama.

President Bush orders 1,900 additional combat troops to Panama (Operation Nimrod Dancer).

In October 1989, Noriega foiled a second coup attempt by members of the Panamanian Defense Forces (PDF), led by Major Moisés Giroldi.

Pressure mounted on Bush. Bush declared that the U.S. would not negotiate with a drug trafficker and denied knowledge of Noriega's involvement with the drug trade prior to his February 1988 indictment, although Bush had met with Noriega while Director of the CIA and had been the Chair of the Task Force on Drugs while Vice President. On 15 December, the Panamanian general assembly passed a resolution declaring that a state of war existed between Panama and the United States

16 December, four U.S. military personnel were stopped at a roadblock around 9:00 p.m. outside PDF headquarters in the neighborhood of Panama City.

The next day after the four U.S. military personnel incident, President Bush ordered the execution of the Panama invasion plan; the military set H-Hour as 0100 on 20 December.

The military incursion into Panama began on 20 December 1989, at 1:00 a.m. local time. The operation involved 27,684 U.S. troops and over 300 aircraft. These aircraft were deployed against the 16,000 members of the PDF.

The official U.S. justification for the invasion was articulated by President George H. W. Bush on the morning of 20 December 1989, a few hours after the start of the operation.

Elements of 1st and 3rd Bn, 7th Special Forces Group (Airborne) conducted air assault and secured Pacora River Bridge preventing PDF reinforcements from reaching Omar Torrijos Airport and Panama City.

Operation Nifty Package was an operation launched by Navy SEALs to prevent Noriega's escape. They sank Noriega's boat and destroyed his jet, at a cost of four killed and nine wounded.

3d Bde, 7th Infantry Division (L) (4/17th Inf) began operations in Colon City, the Canal Zone, and Panama City.

The Raid at Renacer Prison was an attack on the El Renacer prison in Gamboa, Panama, by units of the 82nd Airborne Division of the US Army on 20 December 1989, during the United States invasion of Panama. During the raid the U.S. military was able to free the sixty-four prisoners held in the detention facility.

Marriott Hotel was secured and hostages evacuated.

On 29 December, the General Assembly of the United Nations voted 75–20, with 40 abstentions, to condemn the invasion as a flagrant violation of international law.

Noriega remained at large for several days, but realizing he had few options in the face of a massive manhunt and a $1 million reward for his capture, he obtained refuge in the Vatican diplomatic mission in Panama City. The U.S. military's psychological pressure on him and diplomatic pressure on the Vatican mission, Noriega finally surrendered to the U.S. military on 3 January 1990. He was immediately put on an MC-130E Combat Talon I aircraft and flown to the U.S.

Operation Just Cause ends, and beginning Operation Promote Liberty to rebuild the Panamanian military and civilian infrastructure.