The human rights situation remained difficult during Arzú's tenure, although some initial steps were taken to reduce the influence of the military in national affairs. The most notable human rights case of this period was the brutal slaying of Bishop Juan José Gerardi on 24 April 1998, two days after he had publicly presented a major Catholic Church-sponsored human rights report known as Guatemala: Nunca MasREMHI. In 2001 three Army officers were convicted in civil court and sentenced to lengthy prison terms for his murder.

Guatemala held presidential, legislative, and municipal elections on November 7, 1999, and a runoff presidential election on December 26. Alfonso Portillo was criticized during the campaign for his relationship with the FRG's chairman, former president Ríos Montt. Many charge that some of the worst human rights violations of the internal conflict were committed under Ríos Montt's rule. In the first round the Guatemalan Republican Front (FRG) won 63 of 113 legislative seats, while the National Advancement Party (PAN) won 37. The New Nation Alliance (ANN) won nine legislative seats, and three minority parties won the remaining four. In the runoff on December 26, Alfonso Portillo (FRG) won 68% of the vote to 32% for Óscar Berger (PAN). Portillo carried all 22 departments and Guatemala City, which was considered the PAN's stronghold.

Portillo's impressive electoral triumph, with two-thirds of the vote in the second round, gave him a mandate from the people to carry out his reform program. He pledged to maintain strong ties to the United States, enhance Guatemala's growing cooperation with Mexico, and join in the integration process in Central America and the Western Hemisphere. Domestically, he vowed to support continued liberalization of the economy, increase investment in human capital and infrastructure, establish an independent central bank, and increase revenue by stricter enforcement of tax collections rather than increasing taxation.

Portillo also promised to continue the peace process, appoint a civilian defense minister, reform the armed forces, replace the military presidential security service with a civilian one, and strengthen protection of human rights. He appointed a pluralist cabinet, including indigenous members and individuals who were independent of the FRG ruling party.

Progress in carrying out Portillo's reform agenda during his first year in office was slow. As a result, public support for the government sank to nearly record lows by early 2001. The administration made progress on such issues as taking state responsibility for past human rights cases and supporting human rights in international fora. It struggled to prosecute past human rights cases, and to achieve military reforms or a fiscal pact to help finance programs to implement peace. It is seeking legislation to increase political participation by residents. The prosecution by Portillo's government of suspects in Bishop Gerardi's murder set a precedent in 2001; it was the first time military officers in Guatemala had been tried in civil courts.

Faced with a high crime rate, a public corruption problem, often violent harassment and intimidation by unknown assailants of human rights activists, judicial workers, journalists, and witnesses in human rights trials, the government began serious attempts in 2001 to open a national dialogue to discuss the considerable challenges facing the country.

In July 2003, the Jueves Negro demonstrations rocked the capital, forcing the closing of the US embassy and the UN mission. Supporters of Ríos Montt called for his return to power, demanding that the courts lift a ban against former coup leaders participating in government. They wanted Ríos Montt to run as a presidential candidate in the 2003 elections. The FRG fed the demonstrators.

On November 9, 2003, Óscar Berger, a former mayor of Guatemala city, won the presidential election with 38.8% of the vote. As he failed to achieve a fifty percent majority, he had to go through a runoff election on December 28, which he also won. He defeated the center-left candidate Álvaro Colom. Allowed to run, Ríos Montt trailed a distant third with 11% of the vote.

In early October 2005, Guatemala was devastated by Hurricane Stan. Although a relatively weak storm, it triggered a flooding disaster, resulting in at least 1,500 people dead and thousands homeless.

Determined to make progress against crime and internal police corruption, Óscar Berger in December 2006 came to agreement with the United Nations to gain support for judicial enforcement of its laws. They created the International Commission againstImpunity in Guatemala (CICIG), an independent institution, which is to assist assist the Office of the Prosecutor of Guatemala, the National Police Force, and other investigative institutions. Their goal was to prosecute cells linked to organised crime and to drug trafficking. CICIG has the authority to conduct its own inquiries, and to refer the most significant cases to the national judiciary. The stated objective of CICIG is to "reinforce the national criminal justice system and to help it with its reforms.

As of 2010, CICIG has led inquiries into some 20 cases. It is acting as Deputy Prosecutor in eight other cases. CICIG conducted the investigations leading to an arrest warrant against Erwin Sperisen, former Head of the National Civilian Police (Policia Nacional Civil – PNC) from 2004 to 2007. With dual Swiss-Guatemalan citizenship, he fled to Switzerland to escape prosecution in Guatemala for numerous extrajudicial killings and police corruption. In addition, 17 other persons are covered by arrest warrants related to these crimes, including several former highly placed political figures of Guatemala...to be UPDATED.