The first use of the phrase occurred during the battle for Fort Donelson in the Civil War. Commanding Union general Ulysses S. Grant received a request for terms from the fort's commanding officer, Confederate general John Floyd. Grant's reply was brief: "No terms except an unconditional surrender can be accepted. I propose to move immediately upon your works." When news of Grant's victory -- one of the Union forces' first in the Civil War -- was received in Washington, newspapers of the day published (and President Lincoln endorsed) that Grant's first two initials, "U.S.", stood for "unconditional surrender".
The phrase was repeated by the Union throughout the Civil War, and its use was revived during World War II at the Casablanca conference when United States president Roosevelt offered it to the other Allies and the press as the objective of the war against the Axis Powers of Germany, Italy, and Japan.