The island was allocated to Germany under the 1886 Anglo-German Convention. Phosphate was discovered a decade later and the Pacific Phosphate Company started to exploit the reserves in 1906, by agreement with Germany. Following the outbreak of World War I, the island was captured by Australian forces in 1914. After the war the League of Nations gave Britain, Australia, and New Zealand a trustee mandate over the territory. The three governments established the British Phosphate Commissioners, who took over the rights to phosphate mining.

During World War II Japan occupied Nauru in August 1942 and deported 1,200 Nauruans to work as laborers in the Caroline Islands, where 463 died. The survivors returned to Nauru in January 1946.

After the war the island became a UN Trust Territory under Australia, in line with the previous League of Nations mandate, and it remained one until independence in 1968. A plan by the partner governments to resettle the Nauruans (because of disappearing phosphate and damage to the island caused by extensive mining) on Curtis Island, off the north coast of Queensland, Australia, was abandoned in 1964 when the islanders decided to stay put. In 1967, the Nauruans purchased the assets of the British Phosphate Commissioners and in June 1970 control passed to the Nauru Phosphate Corporation. Nauru became an independent republic in 1968.

In 1989 Nauru filed suit against Australia in the International Court of Justice in The Hague for damages caused by mining while the island was under Australian jurisdiction. Australia settled the case out of court in 1993, agreeing to pay A$107 million (U.S.$85.6 million) and to assist Nauru with environmental rehabilitation.