The Canadian Alliance party was created from the remains of the former Reform Party of Canada at a convention in Ottawa in January of 2000 in an attempt to merge conservative opposition to the Liberal Party. The policy platform accepted at that time included a flat, 17% tax rate for all Canadians, mandated balanced budgets and debt repayment, and support for the conservative creeds of "free enterprise,""strong families" and "safer streets and secure borders." In July 2000 Stockwell Day, a prominent Alberta politician, scored a surprise victory over Preston Manning to become the first leader of the Canadian Alliance. An election call a few months later found the party and Day unprepared, however. The election in late November saw the Canadian Alliance increase its number of seats (over that of the previous Reform Party) to 66, and retain Reform's title of Her Majesty's Official Opposition to the victorious Liberals, who took 172 seats. Despite these gains, the Alliance had fallen short of many members' expectations. Over the next few months, Day's credibility and that of the party declined rapidly in the face of a disastrous lawsuit launched against Day while he was a provincial politician and a series of other embarrassing political mistakes. Growing dissension over Day's leadership saw several MPs bolt from the Alliance caucus in the spring of 2001. In July, Day resigned as leader. He subsequently attempted a political comeback, running in the leadership race that followed. Day's attempt failed, however, when on 20 March 2002 Stephen Harper was elected the Alliance's new leader.

The party consolidated under Harper's leadership. The Progressive Conservative Party under Joe Clark had hoped an Alliance collapse would revitalize its political fortunes.

Clark's resignation as leader in August 2002 provided the opportunity for a conciliation between Canada's two right-of-centre parties. Shortly after taking over as the new Conservative leader, Peter MacKay began secret negotiations on a formal merger. In October 2003 MacKay and Harper announced that an agreement to merge, in principle at least, had been reached. On 5 December 2003, 96% of the Alliance's membership voted in favour of the merger. The next day, the Progressive Conservative membership held a similar vote with a similar outcome. On 8 December Harper and MacKay announced the founding of a new party, the Conservative Party of Canada. The Canadian Alliance Party ceased to exist.