On April 6, 1936, Chang met with CPC delegate Zhou Enlai to plan the end of the Chinese Civil War. KMT leader Generalissimo Chiang Kai-shek at the time took a passive position against Japan and considered the communists to be a greater danger to the Republic of China than the Japanese, and his overall strategy was to annihilate the communists before focusing his efforts on the Japanese. He believed that "communism was a cancer while the Japanese represented a superficial wound." Growing nationalist anger against Japan made this position very unpopular, and led to Chang's action against Chiang, known as the Xi'an Incident.

In December 1936, Chang and General Yang Hucheng kidnapped Chiang, imprisoning him until he agreed to form a united front with the communists against the Japanese invasion. After two weeks of negotiations, Chiang agreed to unite with the communists and drive the Japanese out of China. When Chiang was released on December 26, Chang chose to return to the capital city of Nanjing with him; once they were away from Chang's loyal troops, Chiang had him placed under house arrest. From then on, he was under constant watch and lived near the Nationalist capital city, wherever it moved to.