At the end of WW2, the Greater Nazi Reich and the Japanese Empire decided to divide the former United States into three areas: one area with the direct influence of the Nazi Reich, which became the official state of Nazi America, one area under the direct influence of the Japanese Empire, which became the official state of the Japanese Pacific States and one area between the two as a buffer, now known as the Neutral Zone. A delegation of the remnant of the U.S. government, which has already capitulated by 1945, was sent to the "Peace Conference" that decide the division of the former USA, but had few words to say to the conference. The delegation was even forbidden to arrive to the Conference with the flag of the former United States or of any other states of the Union, and could not decide the name of the new official state. The Japanese Empire and the Nazi Reich agreed with the "formula" of "Neutral Zone". The Neutral Zone is politically neutral and politically independent from both the Nazi Reich and the Japanese Empire, but is economically dependent on the Nazi and the Japanese blocks, which both exercise various methods of pressure on the Neutral Zone.
The territory of the Neutral Zone is composed of the central region of the former USA, that both the Nazi Reich and the Japanese Empire relinquished of occupation. From Idaho to New Mexico, its territory is the smallest of the three states, including the eastern third of Washington State, almost all of Idaho, the western third of Montana, the western two thirds of Wyoming, the eastern half of Utah, the Western two thirds of Colorado, central part New Mexico, and a small region of western Texas. The country borders Nazi America to the east, the Japanese Pacific States to the west, Canada to the north, and Mexico to the south.
In the second season, it's later reveal that the Neutral Zone, include a partition of former Canada, which was partitioned as well after the World War II, including a section of the former province of Alberta and the Northwest Territories of Canada, dividing the former province of British Columbia and Alaska, that are part of the Pacific States, while the remaining territory of Canada, has been incorporated in Nazi America.
The capital of the Neutral Zone is Denver which was the only major city(at the time) that both the Nazis and the Japanese Empire relinquished control. However, the city is small and poor compared to San Francisco and New York City. It is unclear what the methods of election and governance of the Zone are, though it seems that the "Head of State" of the Neutral Zone takes the title of "Governor" (though governor is usually the title of the head of a non-sovereign or sub-national level of government). Moreover, the country is politically neutral and does not posses an official army or national militia. The local police itself is limited in its armament and size, so much so that the police in the Neutral Zone are only in major cities and along main transport routes (though Joe Blake and Juliana Crain never encountered any onscreen). This has the advantage of helping the American Resistance to operate in the country largely unopposed by the local authorities. On the other end, in a effort to solve the problem, state officials give license to "bounty hunters" to operate in the territory in place of the police, leaving the disadvantage of allowing vicious bounty hunters such as The Marshall to operate unchecked, turning the country into a place resembling a "frontier" with little or no law. Interesting in the country White, Latinos, Black people and even Albinos can live undisturbed, which is evidence that the racial policies of the Reich are not enforced in the Neutral Zone.
The Neutral Zone has a poor economy, dependent on Nazi America and the Japanese Pacific States. It is dependent on the importation of raw materials, including oil. Though not the official currency, the Reich Mark is used in almost all transactions within the country.
Though it never shown onscreen and only mentioned in the credits, the Neutral Zone has its own national flag. The delegation of the U.S. remnant to the "Peace Conference" managed to trick the Nazi and Japanese delegations into using a variant of the Denver City and county flag, which is a zigzag white stripe which horizontally separates a red field below from a blue field above, however the delegation removed the center yellow circle on the blue field due to resemblance of the Japanese Rising Sun. The flag was accepted in the Peace Conference of 1947. Given the particular patterns of the flag, the flag contributed on the colloquial name of the zone as the "Rocky Mountains States", though by 1962, seem that the flag is only shown in the capitol government of the Neutral Zone at Denver, and possibly other few mayoral cities in the region (given that in Canon City the flag is never shown). In reality, the Flag of Denver is currently used and was first introduced in 1926, having been designed by a high school student.