Little is known of Timor and its inhabitants before 1500, although Chinese and Javanese traders visited the island in search of plentiful sandalwood and beeswax from the 13th century. Portuguese traders first arrived in 1509, and in 1556 a handful of Dominican friars established the first Portuguese settlement at Lifau, in the present-day Oecussi enclave in East Timor. Dutch-Portuguese rivalry in the region saw continued skirmishes, resulting in the 1859 Treaty of Lisbon that divided Timor, giving Portugal the eastern half of the island, together with the north-coast pocket of Oecussi in the west.
Portuguese Timor was a neglected outpost, ruled via a traditional system of local chiefs who acted as agents for the colonisers. It wasn't until the 20th century that Portugal assumed more direct control - up until then, the island's traditional political systems were intact. European influence was concentrated in coastal areas, the interior of the island only being encroached upon in the 1920s.
Timor was strategically significant during World War II, being a potential launching pad for a Japanese invasion of Australia. About 230 Australian troops mounted a guerilla campaign against 20,000 Japanese soldiers, keeping the Japanese at bay for several months thanks to the assistance they received from the East Timorese. Massive sacrifices were made by the locals: by the end of the war about 60,000 East Timorese had lost their lives.
Following a military coup in Portugal in 1974, East Timor felt independence inching closer, and several political parties sprang up. Indonesia also saw an opportunity, and on 11 August 1975 an internal dispute between the two major Timorese parties, Fretilin and the Timorese Democratic Union (UDT), gave the neighbouring power all the excuse it needed. The invasion commenced on 7 December 1975, and although the Fretilin forces proved their worth as guerilla fighters, Indonesia's military prevailed. East Timor was officially declared Indonesia's 27th province on 16 July 1976.
The Indonesian invasion and occupation was brutal. Falintil, the armed wing of Fretilin, fought a guerrilla war with marked success in the first two or three years but after that began to weaken considerably. The cost to the Timorese people was horrific, with estimates of 100,000 or more dead, many through starvation or disease.
The invasion drew the ire of the international community. The United Nations did not - and has never - recognised Indonesia's sovereignty over East Timor. But despite passing a resolution to the contrary, the UN Security Council took no action. Only one country recognised the illegal occupation: Australia. The nation that possibly owed its war-time survival to the East Timorese turned its back for expediency's sake: Indonesia was too important an ally to make a scene, and the waters between the two countries are oil-rich.
The world was alerted to East Timor's plight on 12 November 1991, when army troops opened fire on protesters at the Santa Cruz cemetery in Dili. The region was again in the news in 1996 when East Timorese Catholic Bishop Carlos Belo and leading Timor spokesman José Ramos-Horta won the Nobel Peace Prize. Timorese hopes for independence remained high but Indonesia showed no signs of making any concessions. All was to change with the fall of the Soeharto regime. Shortly after taking office in May 1998, Soeharto's successor, President Habibie, announced a referendum for East Timorese autonomy, much to the horror of the military. Indonesia and Portugal signed an agreement in May 1999, giving a mandate to the UN to conduct the ballot.
The vote ran smoothly, with the result that almost 80% of the people of East Timor had voted for independence. Celebrations were shortlived. The militia groups, with backing from the Indonesian military, commenced a rampage through East Timor. Tens of thousands of pro-independence East Timorese - some claim over 100,000 - were rounded up and either killed or removed from the region. The militia and the military - by this stage indistinguishable - controlled the streets, while towns, including the capital, Dili, were sacked.
The Indonesian government attempted to play down the situation but in the face of international condemnation eventually accepted UN troops into East Timor. The Australian-led International Force in East Timor - INTERFET - landed on 20 September 1999. Before order was restored, many Timorese had lost their lives, half a million people had been displaced, and the country's infrastructure had been shattered.
The United Nations Transitional Administration was established in October 1999 to adminster East Timor during the transition. Aid and foreign workers flooded into the country to assist with rebuilding the civil service, police, judiciary, education and health systems. Up to 100,000 East Timorese remained in refugee camps in West Timor, many being afraid to return home.
The first presidential elections were held in April 2002, with popular independence leader Xanana Gusmao winning by a landslide. Following independence in May 2002, Gusmao numerous challenges. Negotiations with Australia over ownership of oil and gas reserves in the Timor Sea were ongoing, as were judicial proceedings against those who'd engineered the atrocities of 1999. Timor Sea royalties and aid from the UN, Portugal and other donors will be the mainstays of the economy. In May 2004, the UN cut its peacekeeping force from 3000 to 700, those bringing to a gradual close one of its most successful mandates.