By July 1945 Northern East Prussia becomes part of the USSR and in the autumn the first Soviet settlers arrive. In July 1946 Kunigsberg is renamed Kaliningrad. From 1946 to 1948 the city is rebuilt and the remaining German inhabitants deported. The 1960s and 70s mark the replacement of historical buildings with plain utilitarian structures. Further destruction comes in 1967-69 when the 800-year-old castle is dynamited to make way for the House of Soviets. In the late 1980s ethnic Germans arrive from other parts of the USSR. By 1991 5,000 ethnic Germans inhabit the city and 13,000 in the region.

Closed to foreigners since WWII, the Kaliningrad region is reopened on January 1, 1991 when the first direct train since 1945 runs from Kaliningrad to Berlin. The Kaliningrad Region is declared a 'free economic zone' (FEZ) in 1992 in an attempt to revive the economy. It doesn't work. Former sailor and economist Yuri Matutchkin is appointed governor of the Kaliningrad Region by Russian president, Boris Yeltsin in 1993. The governor rules over the local assembly, but still answers to Moscow. In March 1995 a Presidential Decree signed in Moscow 'accidentally' abolishes all the economic privileges set up under the 1992 FEZ. Communists win the local elections in December 1995. On January 22, 1996 President Boris Yeltsin signs a Federal Statute declaring the Kaliningrad Region a 'special economic zone', exempting various companies from customs duties and thereby achieving what the 1992 FEZ agreement failed to do. Yeltsin is re-elected in June 16, 1996 for another four-year term. On October 20, 1996, in the first election in the region Kaliningraders vote for Leonid Gorbienko, former director of the fishing port over Matutchkin. The Duma passes the law regarding Free Economic Zones on July 2, 1997.

The first needle exchange in Russia opens in the city of Kaliningrad on July 27, 1998. Free AIDS test and medical services are also available. With some 1,700 known HIV-positive people, Kaliningrad Region leads Russia in AIDS cases.

Economic crisis rocks the Russian economy on August 17, 1998. Banks go bankrupt, investors lose their savings, prices increase by 30% and the rouble devalues. By September 1998 a state of emergency is declared as most of the population is starving. Kaliningrad receives humanitarian aid from neighbouring countries. In March 23, 1999 Governor Gorbienko opposes the longtime proposition that Kaliningrad become 'fourth Baltic Republic'.