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Presidential elections were held in Indonesia on 5 July and 20 September 2004. As no candidate won a majority in the first round, a runoff was held, in which Susilo Bambang Yudhoyono defeated Megawati Sukarnoputri and was elected president. They were the first direct presidential elections in the history of Indonesia; prior to a 2002 amendment to the Constitution of Indonesia, both the president and vice president had been elected by the People's Consultative Assembly (MPR). Under the new amendment, a candidate pair is elected into office after receiving more than 50% of the vote nationally with at least 2% of the vote in more than half of the provinces of Indonesia. If no pair receives the number of votes required, the election will continue into the second round with the pairs receiving the highest and second highest number of votes. Further regulations set by the General Elections Commission (KPU) state that each pair must be nominated by a political party or coalition of parties which received at least 5% of the popular vote or 3% of the seats to the People's Representative Council (DPR) in the April legislative election. The incumbent, Megawati Sukarnoputri, rose to the presidency following the impeachment of her predecessor, Abdurrahman Wahid, from office. Megawati's bid for election was challenged by four candidates, including incumbent vice president Hamzah Haz. In the first round, former cabinet member and retired general Susilo Bambang Yudhoyono received a plurality of the valid ballots submitted, followed by Megawati. Yudhoyono eventually defeated Megawati with 60.62% of the valid ballots in the second round. He was inaugurated as the sixth president of Indonesia on 20 October 2004.

In the 1999 legislative election, the Indonesian Democratic Party of Struggle (PDI P) won the most number of seats in the People's Representative Council (DPR) and became the largest faction in the People's Consultative Assembly (MPR), the legislative body responsible for electing the president of Indonesia. The PDI–P was led by Megawati Sukarnoputri, the daughter of Sukarno, Indonesia's first president. Megawati's supporters had expected her to be elected president by the MPR, but she failed to reach out to parties other than the National Awakening Party (PKB). Her only opponent at the time was President B. J. Habibie, who came into office in May 1998, but he withdrew his candidacy after his accountability speech was rejected by the MPR. The PKB, which was led by Abdurrahman Wahid, the leader of Indonesia's largest Islamic organisation Nahdlatul Ulama (NU), had also pledged to support Megawati for President. However, it became clear that Megawati did not have enough votes to back her candidacy. Additionally, National Mandate Party (PAN) leader Amien Rais and his Central Axis , a coalition of Islamic and reform parties, began pushing for Wahid's candidacy. Wahid eventually won the MPR's presidential election, and Megawati was elected as vice president. As President, he repealed many of the laws enacted during the Suharto era that discriminated against Chinese Indonesians. Among these was the banning on the use of Chinese characters and display of images relating to Chinese culture. Following this act, many political parties began to reach out to Chinese Indonesians for their votes by displaying Chinese characters on campaign material. Following Wahid's impeachment and removal from office by the MPR in July 2001, the legislative body elevated Megawati to the presidency. She would complete the remainder of Abdurrahman's five year term, ending in October 2004. including the removal of the military's 38 appointed seats in the Assembly, and an amendment for direct election of the President and Vice President. This presidential election process would involve political parties nominating a presidential and vice presidential ticket with the option of a runoff election.

In December 2003, the International Foundation for Electoral Systems (IFES) began a tracking survey in order to assess the popularity of potential candidates. The survey continued until the start of the first election round on 5 July and included thirteen possible candidates for president. The first IFES survey indicated that incumbent President Megawati Sukarnoputri received a plurality of the votes. However, by the time of the April 2004 legislative election, retired General Susilo Bambang Yudhoyono had taken the lead from Megawati after resigning from her cabinet in March. Other potential candidates included DPR Speaker Akbar Tanjung and Yogyakarta Sultan Hamengkubuwana X. The results of the legislative election determined which political parties were eligible to submit presidential tickets. Only parties which received at least 5% of the popular vote or 3% of seats (17 of 550 seats) in the DPR would be allowed to submit candidates. Parties that did not meet these criteria must join with other parties to meet at least one criterion. Seven political parties met these criteria: Golkar, the Indonesian Democratic Party of Struggle (PDI P), the National Awakening Party (PKB), the United Development Party (PPP), the Democratic Party (PD), the Prosperous Justice Party (PKS), and the National Mandate Party (PAN). The PKS was the only party not to nominate candidates, but it later threw its support behind the PAN. The KPU announced the final list of candidates on 14 May. Following the announcement, all candidates were required to undergo medical screening. On 22 May, the commission announced that the PKB's presidential candidate, former President Abdurrahman Wahid, had failed the eye test and was not allowed to enter in the election.

Former security minister Susilo Bambang Yudhoyono won the first round with 33% of the vote. Incumbent President Megawati Sukarnoputri was second with 26%, ahead of former armed forces chief Wiranto on 22%. Yudhoyono did not do as well as earlier opinion polls had suggested, while Megawati did better. This was attributed by Indonesian observers to Yudhoyono's lack of a nationwide party machine, such as Megawati's PDI P and Wiranto's Golkar. The counting of 113 million votes, already a massive task in such a large and diverse country, was made more difficult by problems with the ballot papers. Voters cast their ballots by making a hole in the ballot paper with a nail, above the photo of their preferred candidate. Because the ballot paper was handed to voters folded in half, many made the hole without unfolding the ballot, thus making two holes and invalidating their vote. Hundreds of thousands of these votes were invalidated before the General Election Committee (KPU) ruled that such ballots should be accepted. This necessitated recounts in many places, slowing the count and raising fears of a disputed result.

ProvinceYudhoyonoMegawatiWirantoAmienHamzahVotes%Votes%Votes%Votes%Votes%Aceh519,19724.39120,2265.65204,5349.611,195,82356.1888,8364.17North Sumatra1,523,61227.232,233,77739.92934,21316.69798,79014.27105,6871.89West Sumatra518,64825.30121,2545.92610,84729.80741,81136.1957,2282.79Riau677,76132.52460,32822.09504,01724.19397,76119.0944,0922.12Jambi520,14538.73273,92520.39364,65127.15155,97411.6128,4372.12South Sumatra1,241,09536.491,127,60833.15640,29418.82341,71610.0550,6441.49Bengkulu196,05726.51155,65721.04253,98634.34121,48316.4212,4801.69Lampung1,430,72939.45896,58124.72881,71524.31359,2859.9158,2971.61Bangka Belitung Islands165,65733.26179,77736.0982,25016.5158,75911.8011,6562.34Riau Islands224,33437.56153,13825.6481,81613.70128,55121.529,4371.58Jakarta1,988,30638.231,172,89122.66499,4559.971,415,58226.64121,9242.50West Java7,100,17532.415,095,70523.265,341,52624.383,562,17316.26810,5193.70Central Java5,276,43228.905,807,12731.813,943,03221.602,409,13813.20820,2734.49Yogyakarta576,01228.05557,13327.13334,06716.27558,06827.1828,2931.38East Java7,458,39935.635,896,27828.175,076,45424.251,902,2549.09599,8062.87Banten1,706,54835.611,193,41424.90922,29919.25796,75816.63172,9713.61Bali654,12732.081,115,78854.72210,78410.3448,4722.389,7910.48West Nusa Tenggara715,83833.03223,20410.30723,48433.39436,07320.1268,3823.16East Nusa Tenggara312,77714.501,344,11662.32432,82320.0758,3412.708,7570.41West Kalimantan477,72423.73821,57740.81415,49220.64185,0979.19113,2445.63Central Kalimantan303,12334.37296,33533.60170,19319.2988,43910.0323,9762.72South Kalimantan600,15637.30211,88113.17353,73221.98339,99321.13103,4296.43East Kalimantan558,90039.08337,45823.60246,71517.25255,66517.8831,4592.20North Sulawesi355,43628.28389,13530.96451,66335.9347,3093.7613,3801.06Central Sulawesi539,62443.71119,9179.71455,16736.87101,8778.2517,8651.45South Sulawesi2,854,77464.17381,3858.57678,44515.25476,48310.7157,7281.30Southeast Sulawesi398,54441.72108,90511.40361,38637.8374,4967.8011,9071.25Gorontalo31,2105.9439,6477.55402,16276.5739,5697.5312,6242.40Maluku100,74814.24269,61138.10288,09140.7140,3925.718,8871.26North Maluku102,35322.0798,45921.23181,37339.1075,40416.266,2721.35West Irian Jaya148,67547.80102,19132.8538,42512.3518,2215.863,5381.14Papua465,42446.75202,29520.32157,70215.84126,42912.7043,7764.40Overseas95,64437.8062,38124.6543,99517.3936,74514.5214,2665.64Total39,838,18433.5731,569,10426.6126,286,78822.1517,392,93114.663,569,8613.01Source: Statistics Indonesia; Ananda, Arifin & Suryadinata
Wiranto refused to accept the election results and petitioned the Constitutional Court. Wiranto and Salahuddin argued that, due to irregularities in ballot counting by the KPU, they had lost 5,434,660 votes from twenty six provinces. Those ballots would have made the total popular vote for the pair higher than that for Megawati and Hasyim, putting the former pair instead of the latter in the second round. However, the Court ruled on 10 August that it found no irregularities and upheld the commission's final count.

ProvinceYudhoyonoMegawatiVotes%Votes%Aceh1,561,15677.10463,76922.90North Sumatra2,808,21252.612,530,06547.39West Sumatra1,585,79683.77307,19616.23South Sumatra1,719,01650.991,652,30249.01Riau1,309,24565.79680,70734.21Bengkulu444,15661.71275,63238.29Lampung2,165,77860.611,407,23639.39Bangka Belitung Islands233,45451.29221,71548.71Riau Islands367,37465.33194,93334.67Jambi917,95269.52402,54230.48Jakarta3,392,66369.211,509,40230.79West Java13,186,77662.767,825,25137.24Central Java8,991,74451.678,409,06648.33Yogyakarta1,151,04359.69777,46740.31East Java12,150,90159.658,217,99640.35Banten2,913,65962.761,728,73237.24Bali755,43237.731,246,52162.27West Nusa Tenggara1,563,49474.96522,41125.04East Nusa Tenggara590,45928.071,513,08871.93West Kalimantan962,36549.98963,06550.02Central Kalimantan474,83955.90374,54644.10South Kalimantan1,096,63773.30399,52826.70East Kalimantan856,36563.97482,24736.03North Sulawesi686,68856.72523,90343.28Central Sulawesi933,26177.96263,81322.04South Sulawesi3,869,36187.24565,95312.76Southeast Sulawesi721,79278.07202,70521.93Gorontalo276,40257.99200,23042.01Maluku311,26945.39374,43754.61North Maluku277,07761.84170,97538.16Papua642,86962.84380,09137.16West Irian Jaya182,48159.39124,76040.61Overseas166,63467.9878,50032.02Total69,266,35060.6244,990,70439.38Source: Ananda, Arifin & Suryadinata; Statistics Indonesia

Indonesia: President Megawati Sukarnoputri said in a speech on Armed Forces Day, 5 October, "We have to show to the world we are a big nation. All components of the nation have to stick to the agreement we have struck that whoever is elected in the democratic election has to be accepted. We may have chosen differently. However, we had the same objective: that is to bring the nation to a better future." Australia: Prime Minister John Howard planned to attend Yudhoyono's inauguration. Howard said, "I look forward to working closely with Dr. Yudhoyono and his new government to continue and extend the close cooperation between our two nations, particularly on counter terrorism." People's Republic of China: Politburo Standing Committee member Wu Guanzheng met with Yudhoyono on 13 October and conveyed congratulations from President Hu Jintao.

Susilo Bambang Yudhoyono and Jusuf Kalla were sworn in as president and vice president on 20 October. It was the first Indonesian presidential inauguration to be attended by foreign leaders. After a selection process that began on 15 October, the United Indonesia Cabinet was announced later following the inauguration. The 36 member cabinet was sworn in at the State Palace on 21 October. The process of selecting candidates for Yudhoyono's cabinet was considered "decent, intelligent, and indecisive". While attempting to satisfy as many members as possible in his coalition of small parties, Yudhoyono created a cabinet that was neither quite as cohesive nor effective. However, Kalla soon became the party chairman of Golkar in late 2004 and turned the party's votes in the DPR to those in favour of the government, creating an effective bloc and leaving Megawati's PDI–P as the largest non government party in the DPR. Although the first one hundred days of Yudhoyono's administration saw continuing economic stability, it was overshadowed by the events of the Indian Ocean earthquake which occurred on 26 December. The earthquake triggered tsunamis that destroyed the coastline of the provinces of Aceh and North Sumatra and killed more than 200,000 people.