The Terran Alliance ultimately collapsed beneath the weight of its own discontent in September 2314. When a short, vicious war broke out between rival Expansionist and Liberal factions, Fleet Admiral James McKenna intervened with Alliance military forces to halt the conflict.

McKenna was a proud, charismatic career officer with a spotless military record and a long family heritage of service to the Terran Alliance (and the Western Alliance before it). He was the archetypal hero, appearing at a critical juncture and turning the tide of history in a new direction. McKenna was determined to restore his native Terra to its former proud position as leader and progenitor of "Homo stellaris." After dissolving the Alliance, he declared himself ruler of a new state, the Terran Hegemony. Under his leadership, the Hegemony embarked on an active and campaign to restore Terra's political control over its former colonies. By the time of McKenna's death in 2339, the Hegemony had used military, political, and economic means to reassert its authority over more than 100 worlds.

In 2340, Michael Cameron, McKenna's nephew, was elected to succeed his uncle as Director-General. During Cameron's term of office, the Hegemony engaged in an ambitious government-sponsored research effort. The first significant product of these efforts was the development of a prototype WorkMech, a fusion-powered mining vehicle that reproduced body movements through artificial muscle structure based on the myomer technology developed back in the 21st century.

The reemergence of Terra as both a political and scientific force created a new era of détente and relatively peaceful development for the whole human sphere. Starting with the Crucis Pact of 2317, a number of mutual-defense leagues and trade agreements similar to the Treaty of Marik were signed among worlds. Although most of these agreements granted member-worlds total sovereignty over internal matters, they also allowed more developed colonies to control poorer, younger neighbors. By the time the Hegemony and other states of the Inner Sphere undertook the Grand Survey of 2389, ten separate states with strong central governments had emerged, each controlling worlds within communications range of their capitals. Six strong states had emerged in the "Inner Sphere," and other, smaller governments had sprung up at the fringes of colonized space, now known as "the Periphery." There were, however, frequent disputes over border worlds, especially those with ample water or mineral resources. This tended to make the boundaries of the various states a matter of tension or even war. As confrontations over these planets grew more frequent, an arms race followed, further exacerbating tensions throughout human space.

Though the other federations and states tried to follow the lead of the Hegemony in supporting new research facilities, most lagged behind. In one respect, however, the other governments mirrored the Hegemony absolutely: the creation of a hereditary leadership, embodied in a single ruling family. Commenting on this, social historians have argued that the dynastic form of rule probably offered a comforting reassurance after the chaos of the Exodus years.