This article questions the conventional belief that the combined system of small-district and proportional representation, which Japan introduced in 1994, would neither resolve the problems of the medium-district system nor have greater influence than the medium-district system have done on the party system development, and argues that the new combined system of small-district and proportional representation and the demise of cold-war style of ideological division have facilitated the development of the two-party system in Japan. The Democratic Party, which has grown as a party that has united both conservatives and moderates who want to hold the Liberal Democratic Party(LDP) in check, has succeeded in persuading the Japanese public to believe that the party is realistic, moderate, and responsible in implementing the party policies and thus, is an alternative to the LDP government. In addition, the demise of the '1955 regime' and the increasing ideological convergence among the parties have further contributed to the development of the two-party system.