The Federation military was defeated at Naboo. After the losing thousands of B1-series battle droid, Federation leaders researched concepts for an improved combat model, ultimately resulting in the B2-series super battle droid. The Federation also began to build up its military. Prior to the Separatist Crisis, the Federation and other organizations secretly allied with Dooku, the Count of Serenno and a Sith Lord. Federation Viceroy Nute Gunray pledged battle droids to Dooku's cause, the Confederacy of Independent Systems. However, after Jedi Knight Obi-Wan Kenobi learned that Dooku was building a Droid Army with the Federation and other commerce guilds, the Galactic Republic deployed its new Grand Army of clone troopers to combat the CIS.
During the ensuing Clone Wars, Senator Lott Dod claimed the Federation was neutral, but the Federation continued to do business with the Separatists and secretly aided Dooku. During the war, the Federation fleet blockaded Pantora to push the planet towards the Separatists.
- Rise of the Separatists