While the Spanish trusteeship labor system, or encomienda, had been abolished in 1720, most Indians at the time living in the Andean region of what is now Peru, Ecuador and Bolivia, who made up nine tenths of the population at the time, were still pushed into forced labor for what was legally labeled as public work projects. However, most natives worked under the supervision of a master either tilling soil, mining or working in textile mills. What little wage that was acquired by workers was heavily taxed and cemented Indian indebtedness to Spanish masters. The Catholic Church also had a hand in extorting these natives through collections for saints, masses for the dead, domestic and parochial work on certain days, forced gifts, etc. Those fortunate enough not to be subjugated to forced labor were subject to the Spanish provincial governors, or corregidores, who also heavily taxed any free natives, similarly ensuring their financial instability.

Condorcanqui interest in the Indian cause had been spurred by the re-reading of the Royal Commentaries of the Incas, a romantic and heroic account of the history and culture of the ancient Incas. The book was outlawed at the time by the Lima viceroy for fear of it inspiring renewed interest in the lost Inca culture and inciting rebellion. The marquis' native pride coupled with his hate for the oppressors of his people, caused José Gabriel to sympathize and frequently petition for the improvement of Indian labor in the mills, farms and mines; even using his own wealth to help alleviate the taxes and burdens of the natives. After many of his requests for the alleviation of the native Indian’s conditions fell to deaf ears, Condorcanqui decided to organize a rebellion. He began to stall on collecting reparto debts and tribute payments, for which the Tintan corregidor and governor Antonio de Arriaga threatened him with death. Feeling that his time was ripe, Condorcanqui changed his name to Tupac Amaru II and declared his lineage to the last Incan ruler Felipe Tupac Amaru.

Túpac Amaru II's rebellion was one of many indigenous Peruvian uprisings in the latter half of the 18th century, and its birth was marked by the capturing and killing of Tintan corregidor and governor Antonio de Arriaga on November 4, 1780. The event unfolded after both Tupac Amaru II and the governor Arriaga attended a banquet hosted by a priest. When governor Arriaga left the party in a drunken state, Tupac Amaru II and several of his allies captured him and forced him to write letters to a large number of Hispanics and curacas. When about 200 of them gathered within the next few days, Tupac Amaru II surrounded them with approximately 4000 Indians. Claiming that he was acting under direct Spanish royal orders, Amaru II gave Arriaga’s slave Antonio Oblitas the privilege of executing him. A platform in the middle of a local town plaza was erected, and the initial attempt at hanging the corregidor failed after the noose had snapped. He then ran for his life to try and reach a nearby church, but was not quick enough to escape being successfully hanged at the second attempt.

After the execution of the corregidor, Amaru II began his insurrection. He organized an army of six thousand Indians who had abandoned their work to join the revolt. As they marched towards Cuzco, the rebels occupied the provinces of Quispicanchis, Tinta, Cotabambas, Calca, and Chumbivilcas. After years of living under oppression, the rebels looted the Hispanic houses and killed their Spanish oppressors. In November 18, 1780, Cuzco dispatched over 1,300 Hispanic and Indian loyalist troops. The two opposing forces clashed in the town of Sangarara. (This battle would be recorded later as the Battle of Sangarara.) It was an absolute victory for Amaru II and his native Indian rebels; all of the 578 Hispanic soldiers were killed and the rebels took possession of their weapons and supplies. The victory however, also came with a price. The battle revealed that Amaru II was unable to fully control his rebel followers, as they viciously slaughtered without direct orders. Reports of such violence and the rebels' insistence on the death of Hispanics eliminated any chances for a support by the Creole class. The victory achieved at Sangarara would be followed by a string of defeats. The most critical defeat came in Amaru II’s failure to capture Cuzco, which was fortified by a combined troop of loyalist Indians and reinforcements from Lima. After subsequent skirmishes around the surrounding region, Amaru II and his rebels became surrounded between Tinta and Sangarara. A betrayal by two of his officers, colonel Ventura Landaeta and captain Francisco Cruz, sealed Amaru II’s defeat and capture.

Amaru II was sentenced to a cruel execution. He was forced to bear witness to the execution of his wife, his eldest son Hipólito, his uncle Francisco, his brother-in-law Antonio Bastidas, and some of his captains before his own death. He was sentenced to be tortured and beheaded. Preceding his own beheading, Túpac Amaru II had his tongue cut out and his limbs tied to four horses. Tupac Amaru was too strong to be killed in this fashion. Due to this, the method chosen to kill him was to behead him (as part of a failed attempt to quarter him) on the main plaza in Cuzco, in the same place his great-great-great-grandfather the last Inca Tupac Amaru had been beheaded. When the revolt continued, the Spaniards executed the remainder of his family, except his 12-year-old son Fernando, who had been condemned to die with him, but was instead imprisoned in Spain for the rest of his life. It is not known if any members of the Inca royal family survived this final purge. Amaru's body parts were strewn across the towns loyal to him, his houses were demolished, their sites strewn with salt, his goods confiscated, his relatives declared infamous, and all documents relating to his descent burnt. At the same time, on May 18, 1781, Incan clothing and cultural traditions, and self-identification as "Inca" were outlawed, along with other measures to convert the population to Spanish culture and government until Peru's independence as a republic. However, even after the death of Amaru, Indian revolt still overtook much of Southern Peru , Bolivia and Argentina, as Indian revolutionaries captured Spanish towns and beheaded many inhabitants. In one instance, an Indian army under rebel leader Túpac Katari overtook the city of La Paz for one hundred and nine days before Argentinean troops stepped in to relieve the city. While Tupac Amaru II's rebellion was not a success, it marked the first large-scale rebellion in the Spanish colonies and inspired the revolt of many native Indians and mestizos in the surrounding area. The rebellion gave the Natives a new state of mind, and set the stage for their support of Bolivar forty years later. They were now willing to join forces with anyone who opposed the hated Spanish. For all his sacrifice he was proclamated King of America.