Sugar cultivation declined over the next 100 years, and by the mid-1600s, Sao Tome was little more than a port of call for bunkering ships. In the early 1800s, two new cash crops, coffee and cocoa, were introduced. The rich volcanic soils proved well suited to the new cash crop industry, and soon extensive plantations (rocas ), owned by Portuguese companies or absentee landlords, occupied almost all of the good farmland. By 1908, Sao Tome had become the world's largest producer of cocoa, still the country's most important crop.

The rocas system, which gave the plantation managers a high degree of authority, led to abuses against the African farm workers. Although Portugal officially abolished slavery in 1876, the practice of forced paid labor continued. In the early 1900s, an internationally publicized controversy arose over charges that Angolan contract workers were being subjected to forced labor and unsatisfactory working conditions. Sporadic labor unrest and dissatisfaction continued well into the 20th century, culminating in an outbreak of riots in 1953 in which several hundred African laborers were killed in a clash with their Portuguese rulers. This "Batepa Massacre" remains a major event in the colonial history of the islands, and the government officially observes its anniversary.

By the late 1950s, when other emerging nations across the African Continent were demanding independence, a small group of Sao Tomeans had formed the Movement for the Liberation of Sao Tome and Principe (MLSTP), which eventually established its base in nearby Gabon. Picking up momentum in the 1960s, events moved quickly after the overthrow of the Salazar and Caetano dictatorship in Portugal in April 1974. The new Portuguese regime was committed to the dissolution of its overseas colonies; in November 1974, their representatives met with the MLSTP in Algiers and worked out an agreement for the transfer of sovereignty. After a period of transitional government, Sao Tome and Principe achieved independence on July 12, 1975, choosing as its first President the MLSTP Secretary General, Manuel Pinto da Costa.

In 1990, Sao Tome became one of the first African countries to embrace democratic reform. Changes to the constitution, including the legalization of opposition political parties, led to nonviolent, free, and transparent elections in 1991. Miguel Trovoada, a former Prime Minister who had been in exile since 1986, returned as an independent candidate and was elected President. Trovoada was re-elected in Sao Tome's second multiparty presidential election in 1996. The Party of Democratic Convergence (PCD) toppled the MLSTP to take a majority of seats in the National Assembly, with the MLSTP becoming an important and vocal minority party. Municipal elections followed in late 1992, in which the MLSTP came back to win a majority of seats on five of seven regional councils. In early legislative elections in October 1994, the MLSTP won a plurality of seats in the Assembly. It regained an outright majority of seats in the November 1998 elections.

The Government of Sao Tome fully functions under a multiparty system. Presidential elections were held in July 2001. The candidate backed by the Independent Democratic Action Party, Fradique de Menezes, was elected in the first round and inaugurated on September 3. Parliamentary elections held in March 2002 led to a coalition government after no party gained a majority of seats. An attempted coup díetat in July 2003 by a few members of the military and the Christian Democratic Front (mostly representative of former Sao Tomean volunteers from the apartheid-era Republic of South African Army) was reversed by international, including American, mediation without bloodshed. In September 2004, President de Menezes dismissed the Prime Minister and appointed a new cabinet, which was accepted by the majority party. In June 2005, following public discontent with oil exploration licenses granted in the Joint Development Zone (JDZ) with Nigeria, the MLSTP, the party with the largest number of seats in the National Assembly, and its coalition partners threatened to resign from government and force early parliamentary elections. After several days of negotiations, the President and the MLSTP agreed to form a new government and to avoid early elections. The new government includes Maria Silveira, the well-respected head of the Central Bank, who will serve concurrently as both Prime Minister and Finance Minister.