While the struggles continued for Estonian independence, the Latvians were fighting their own struggle for liberty as well. As many of the demoralized German soldiers were being withdrawn from Latvia, a Freikorps unit formed called the Iron Brigade. They deployed to Riga to delay the Red Army advance. Meanwhile, volunteers were recruited from Germany and sent along with remnants of the German 8th Army to join the Iron Brigade, thus constituting the Iron Division. At the same time, the Baltic Germans and some Latvians formed the Baltische Landeswehr whose official mission was to prevent any Red Army advance into East Prussia, but whose real intent was to re-establish their own state or at least dominance in Latvia.

By late February, only the western seaport of Liepaja and surroundings remained in the hands of the German and Latvian forces as the Reds had driven them to the sea. In March 1919, fortune intervened and the Iron Division and Landeswehr won a series of victories over the Red forces who drove south to Riga. This campaign was coordinated with the Estonians who crossed the border southward and drove the Bolsheviks from the northern part of Latvia as well.

Once the Soviets had been driven out the Allied Powers ordered the German government to withdraw its troops. General Rüdiger Graf von der Goltz, nominal commander of the two German units, ignored the order and attempted to seize control of Latvia with the assistance of the local ethnic German population. The Latvian provisional national government took refuge aboard the steamship Saratow as the Germans consolidated power. Afraid to allow the Bolsheviks a foot back in the door, the British declined to interfere. Latvian nationalists turned to Estonia for help. Von der Goltz ordered his German troops to advance north toward the Latvian city of Cesis and the heart of the advancing Estonian 3rd Division. The Estonian commander, General Johan Laidoner, insisted the Germans withdraw to a line south of the Gauja River, but he was ignored. He then ordered the Estonian 3rd Division to seize the Gulbene railroad station in preparation for offensive operations. On the 6th, as an Estonian armored train rolled south of Cesis to check compliance, it was unsuccessfully attacked by the advancing Landeswehr, and the train retreated. The Germans quickly seized the town. Two days later the Estonians launched their bid to free Cesis for the Latvians.

The Germans calmly threw back the hastily assembled Estonian attack against Cesis. This initial clash with the Germans demonstrated to the Estonians that their new opponent was stronger and better equipped than the Soviets. Some weeks would pass while the Estonians brought in more troops and the Germans prepared for another thrust using the Iron Division.