Launched by Defense Minister Ehud Barak in January 2011, the Independence Party was formed out of political survival by Barak. At that time, the Labor party was considering splitting from Prime Minister Benjamin Netanyahu's coalition because of the stalled peace process and, in essence, threatened Barak's leadership of the party if he did not break away. Splitting the party enabled Barak to maintain Netanyahu's government and his position within it.
A faction of Labor MK's joined Independence along with Barak: Matan Vilnai; Shalom Simhon; Orit Noked; and, Einat Wilf. In February 2012, when Vilnai was appointed Israeli Ambassador to China and left his post in the Knesset, Druze political activist Shakib Shanan took over Vilnai's ministerial position and joined the Independence Party.
In their inaugural press conference to announce their formation, the party said they were tired of in-fighting within the Labor Party and now aimed to be "centrist, Zionist, and democratic" and to establish itself as a separate political entity. In order to receive funding from the state yet avoid the long process of registering a party, Barak negotiated a takeover of the Third Way party, a since-defunct party that had held representation in the Knesset during the late 1990's.
After the party's formation, four of the five members on its list were given ministerial posts by PM Netanyahu in his thity-second government. Barak remained Minister of Defense; Shalom Simhon was named Minister of Industry, Trade and Labor and Minister of Minorities; Orit Noked took over the Minister of Agriculture and Rural Development position; and Matan Vilnai became Minister of Home Front Defense (taken over by Shakib Shanan).
In response to the Independence Party's split from Labor, and Labor remaining in the coalition, Labor ministers Avishay Braverman, Isaac Herzog, and Benjamin Ben-Eliezer resigned from their posts in the government.