Kuwait was established in the 16th century when several clans from the Al Aniza tribe migrated to the northern shore of the Persian Gulf from the Najd, their famine-stricken homeland in central Arabia. They settled in what is now known as Qatar for more than sixty years before migrating over sea to settle in the Isle De Chader, where they built a small fort, or “kut”. Kuwait was incorporated within the Ottoman Empire, evidenced by Sheik Mubarak's flying the Ottoman flag over his palace and fully realizing Ottoman authority over his lands. The current rulers of the country are descended from Sabah I, who was chosen by the community, which was composed mainly of traders. They were tasked with administering the affairs of the State, including foreign affairs and taxation/duties. This is unlike most other Arab emirates of the Persian Gulf where the rulers seized and maintained authority by force.

The 17th century saw the Arabian Peninsula in tumultuous times. The area that is now Kuwait was occupied by tribes and used for spice trading from India. By the 18th century, most of the local people made a living selling pearls. However, as pearl farming developed in Japan during the 1930s, Kuwait became impoverished. In 1899, growing British influence led to Kuwait becoming a British protectorate. Oil transformed Kuwait into one of the richest countries in the Arab peninsula; in 1953 the country became the largest exporter of oil in the Persian Gulf. This massive growth attracted many immigrant laborers who were rarely granted citizenship. Kuwait, having amassed great wealth, was the first of the Persian Gulf-Arab states to declare independence on June 19, 1961. Iraq challenged this declaration, claiming that Kuwait was part of its territory. It threatened to invade Kuwait, but was deterred by the Egyptians. After being allied with Iraq during the Iran-Iraq War until its end in 1988 (largely due to the desire for Iraqi protection from Shiite Iran), Kuwait was invaded by Iraq (under Saddam Hussein) on August 2, 1990. Hussein's primary justifications included a charge that Kuwaiti territory was in fact an Iraqi province, and that annexation was retaliation for "economic warfare" Kuwait had allegedly waged through slant drilling into oil supplies that were in disputed territories. The monarchy was deposed after annexation, and a new Kuwaiti governor was installed by Saddam Hussein.

Authorized by the UN Security Council, an American-led coalition of 34 nations fought the Persian Gulf War to reinstate the Kuwaiti Emir. After 6 weeks of fierce fighting in the early 1991, Iraq was forced to withdraw its troops from Kuwait on February 26, 1991; during retreat, the Iraqi Armed Forces practiced a scorched earth policy by setting fire to Kuwaiti oil wells, fires which were once the subject of a now-disproven ecological doomsday scenario advocated by Carl Sagan. The fires took over nine months to fully extinguish, and the cost of repairs to oil infrastructure exceeded US $5,000,000,000. Certain buildings and infrastructural facilities (including Kuwait International Airport) were also severely damaged during the war . Kuwait now remains under the governance of the Amir Jabir al-Ahmad al-Jabir Al Sabah as an independent state and is of strategic importance.