For Marx and Engels the notion of class struggle is the key to understanding history. At all stages of history, they argue, there have been power struggles of one sort or another between social classes. In the medieval era, the prevailing class struggle was between feudal landlords and peasants. For many centuries the landlords were on top, achieving an unchallenged position of dominance in society. However, as the economic foundations of society changed over time, a section of the peasantry was able to form itself into a rising middle-class, or bourgeoisie. This sounded the death knell of feudalism and its replacement with a capitalist mode of production.

Capitalism may be radically different from feudalism, but it shares one crucial feature: the persistence of class struggle. Only now the struggle is no longer between landlord and peasant as in the Middle Ages, but between the bourgeoisie and proletariat, or working-classes. At the time when Marx and Engels were writing it was very much the bourgeoisie that was firmly in control; they were the leaders of society as well as enjoying the lion's share of economic and political power.

However, Marx and Engels believed that, in due course, this would all change dramatically. What they called the inherent contradictions of capitalism would eventually lead to a proletarian revolution which would replace capitalism with a communist system. The class struggle would then be over, resulting in the complete abolition of the previous class system.

In The Communist Manifesto, Marx and Engels claimed that society had always had two classes: the rich and the poor. Their interests had always been antagonistic towards each other. The rich used the poor's labor, and the poor used the rich's resources. The poor were constantly at the mercy of the rich, as they had no security in this system—they could easily be replaced by someone who was poorer and desperate to provide labor.

The Industrial Revolution heightened this discrepancy between rich and poor. Marx and Engels referred to the working classes as the proletariat and the richer classes as the bourgeoisie. The proletariat suffered, as they were constantly at the mercy of the bourgeoisie for their wages, yet the proletariat was not paid the worth of their labor. Marx and Engels saw the proletariat being taken advantage of in the workplace and in society, as government and religion ordered the proletariat to keep working in this system. Marx and Engels saw this system as being unsustainable and asserted that one day the proletariat would rise up and overthrow the bourgeoisie.

In The Communist Manifesto, Marx and Engels traced a history of class conflict stretching back through human history. By "class" they meant what is often called "relationship to the means of production." Some historical examples of class conflict were, in the words of the Manifesto: "freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman." Each of these groups were antagonistic, that is, they always had opposing interests.

The Industrial Revolution, according to Marx, had led to the consolidation of two classes called the bourgeoisie and the proletariat. The bourgeoisie described, in simplest terms, the owners of the means of production (the factories) and those who financed them, and the proletariat was the name Marx and Engels used to describe working class people who worked in the factories and did not receive the full value of their own labor. Over time, Marx thought that the exploitation of the proletariat by the bourgeoisie would be so great as to bring about the destruction of the former in the form of a class revolution.