With the decline in the slave trade, Cape Verde's early prosperity slowly vanished. However, the islands' position astride mid-Atlantic shipping lanes made Cape Verde an ideal location for resupplying ships. Because of its excellent harbor, Mindelo (on the island of S“o Vicente) became an important commercial center during the 19th century.

Portugal changed Cape Verde's status from a colony to an overseas province in 1951 in an attempt to blunt growing nationalism. Nevertheless, in 1956, Amilcar Cabral, a Cape Verdean, and a group of Cape Verdeans and Guinea-Bissauans organized (in Guinea-Bissau) the clandestine African Party for the Independence of Guinea-Bissau and Cape Verde (PAIGC), which demanded improvement in economic, social, and political conditions in Cape Verde and Portuguese Guinea and formed the basis of the two nations' independence movement. Moving its headquarters to Conakry, Guinea in 1960, the PAIGC began an armed rebellion against Portugal in 1961. Acts of sabotage eventually grew into a war in Portuguese Guinea that pitted 10,000 Soviet bloc-supported PAIGC soldiers against 35,000 Portuguese and African troops.

By 1972, the PAIGC controlled much of Portuguese Guinea despite the presence of the Portuguese troops, but the organization did not attempt to disrupt Portuguese control in Cape Verde. Portuguese Guinea declared independence in 1973 and was granted de jure independence in 1974. Following the April 1974 revolution in Portugal, the PAIGC became an active political movement in Cape Verde. In December 1974, the PAIGC and Portugal signed an agreement providing for a transitional government composed of Portuguese and Cape Verdeans. On June 30, 1975, Cape Verdeans elected a National Assembly, which received the instruments of independence from Portugal on July 5, 1975.

Immediately following the November 1980 coup in Guinea-Bissau, relations between Cape Verde and Guinea-Bissau became strained. Cape Verde abandoned its hope for unity with Guinea-Bissau and formed the African Party for the Independence of Cape Verde (PAICV). Problems have since been resolved, and relations between the countries are good. The PAICV and its predecessor established a one-party system and ruled Cape Verde from independence until 1990.

Responding to growing pressure for pluralistic democracy, the PAICV called an emergency congress in February 1990 to discuss proposed constitutional changes to end one-party rule. Opposition groups came together to form the Movement for Democracy (MpD) in Praia in April 1990. Together, they campaigned for the right to contest the presidential election scheduled for December 1990. The one-party state was abolished September 28, 1990, and the first multi-party elections were held in January 1991. The MpD won a majority of the seats in the National Assembly, and the MpD presidential candidate Mascarenhas Monteiro defeated the PAICV's candidate with 73.5% of the votes. Legislative elections in December 1995 increased the MpD majority in the National Assembly. The party won 50 of the National Assembly's 72 seats. A February 1996 presidential election returned President Mascarenhas Monteiro to office. Legislative elections in January 2001 returned power to the PAICV, with the PAICV holding 40 of the National Assembly seats, MpD 30, and Party for Democratic Convergence (PCD) and Party for Labor and Solidarity (PTS) 1 each. In February 2001, the PAICV-supported presidential candidate Pedro Pires defeated former MpD leader Carlos Veiga by only 13 votes.