Business in crime until the late 1920s was run by the "Mustache Petes." They were very slow to change and hindered mobsters like Luciano and others. They also refused to do business with non-Italians, which stepped on the toes of the likes of Meyer Lansky. Luciano later became the chief aide to "Joe the Boss" Masseria. After observing "Joe the Boss" pass up lucrative deals with other gangsters due their ethnicity, Luciano had enough.

In a sense, he was a visionary; he saw the vast potential of having a national crime network that crossed all ethnic lines. Luciano believed the old line mafiosi were the problem and should be wiped out. Thus in 1928, all hell broke loose. Long standing feuds and power grabbing changed the way organized crime would play in years to come.

The Castellammarese War erupted between the numerous forces of Joe the Boss and those of a fast-rising New York mafioso, Salvatore Maranzano. Over the next two years, dozens of gangsters were killed. Luciano avoided the conflict as much as possible and, instead, cemented relationships with the young, second-line leadership in the Maranzano outfit. It soon became clear that younger mobsters in both camps were waiting for one boss to kill off the other. Then the second-line could dethrone the remaining boss. Luciano soon emerged as the leader of this clique.

The war moved into 1931 with Maranzano winning, but Masseria was still powerful. Luciano finally felt he could wait no longer without imperiling his supporters in both camps. Three of his men and Bugsy Siegel, lent by the cooperative Lansky, shot Joe the Boss to death in a Coney Island restaurant. Luciano had guided him there and stepped into the men’s room just before the execution squad marched in. The assassination made Maranzano the victor in the Castellammarese War and, in supposed gratitude to Luciano, Maranzano made him the Number Two man in his new Mafia empire. Maranzano proclaimed himself the "Boss of Bosses" in New York and set up five crime families under him. That was only the beginning of Maranzano's plans. He was determined to become the supreme boss of the entire Mafia in the United States.

To achieve that end, Maranzano compiled a list of two gangsters who had to be eliminated: In Chicago, Al Capone; in New York, Charles Luciano. Maranzano understood Luciano had his own ambitions and figured to crush him quickly. But Maranzano was not quick enough. Luciano and Lansky learned of Maranzano’s plans in advance. Maranzano was going to summon Luciano and Vito Genovese to his office for a conference. He had lined up a murderous Irish gunman, Mad Dog Coll, to assassinate the pair either in his office or shortly after they left. Instead, moments before Coll arrived to set up the ambush, four of Lansky’s gunners, pretending to be government agents, entered Maranzano’s office, and shot and stabbed him to death.