Mackenzie King was also prime minister when the first steps were taken in the late 1940s to bring Newfoundland into the confederation. Newfoundland, like Prince Edward Island, had chosen in 1867 not to join with the other colonies and become a province of Canada. It remained a separate country and although it considered joining Canada on several different occasions, there was little public debate on the issue until 1947. Because of the financial difficulties it encountered during the Great Depression of the 1930s, the colony was forced to suspend responsible government in favour of a Commission of Government appointed by Britain. However, during the Second World War, Newfoundland enjoyed unprecedented prosperity largely because of military spending by Canada and the United States.

After the war, the country elected delegates to a National Convention to consider its constitutional future. After much debate, the Convention recommended to the British Government that it ask the people to choose between continuing the Commission of Government and returning to responsible government in a national referendum. However, there was a small but very well-organized group within the Convention, led by Joseph R. Smallwood (later the province's first premier in 1949) and F. Gordon Bradley. They wanted union with Canada included on the ballot. That was also the preferred choice of the British Government, and it was eventually added to the referendum. Three alternatives were subsequently presented to the people to consider in a referendum: the continuation of Commission of Government for a further five years, the return to responsible government as it existed in 1933, or Confederation with Canada.

It took two referenda to decide the issue. In the first on 3 June 1948, the Commission of Government option was dropped as it garnered the fewest votes. The campaign for the run-off vote on 22 July was fierce. What was at issue was the future of a country; simply put, the question was whether the people were willing to trade their status as a self-governing dominion (the constitutional equal to Canada) for becoming one of the ten provinces of Canada. Those who favoured a return to self-government argued that the British Government had simply suspended Newfoundland's constitution in 1933 and it was the responsibility of the British to restore it before any other constitutional options were considered. In fact, many who opposed Confederation believed that they would receive better terms from Canada if they could negotiate as a constitutional equal. Moreover, the supporters of responsible government spent more of their time attacking Confederation than building a case for Newfoundland's independence, claiming that union with Canada would result in the destruction of Newfoundland's industries and fisheries and would bring higher taxes. The proponents of Confederation claimed that Newfoundland had always lived a precarious existence and that union with Canada offered a much brighter future than facing the postwar world alone. Smallwood and his supporters pointed to the social and economic benefits that Canada had to offer.

The issue was decided in large part by organization. The Confederates were extremely well organized while their opponents were not. Smallwood and his supporters travelled extensively throughout the island while those who favoured a return to responsible government limited their campaign largely to the area around St. John's. Many commentators and historians have also pointed out how the vote was split along urban and rural lines as well as along lines of religion, but there has been a tendency to overstate the influence of religion and geography in the outcome. Likewise, there has been in the last few years an attempt to prove that the outcome was predetermined and that the Newfoundland people were conspired against by the British and Canadians to bring them into confederation. There is no evidence to suggest that was the case. What is true, however, is that the issue of union between Newfoundland and Canada divided communities and families, and after two bitter referenda, the people opted by a slight margin to join Canada because they believed that it offered their best chance of prosperity in the postwar world.