The first island in the Vanuatu group discovered by Europeans was Espiritu Santo, when in 1606 the Portuguese explorer, Pedro Fernandez De Quiros, spied what he thought was a southern continent. Europeans did not return until 1768, when Louis Antoine de Bougainville rediscovered the islands. In 1774, Captain Cook named the islands the New Hebrides, a name that lasted until independence.

In 1825, trader Peter Dillon's discovery of sandalwood on the island of Erromango began a rush that ended in 1830 after a clash between immigrant Polynesian workers and indigenous Melanesians. During the 1860s, planters in Australia, Fiji, New Caledonia, and the Samoa Islands, in need of laborers, encouraged a long-term indentured labor trade called "blackbirding." At the height of the labor trade, more than one-half the adult male population of several of the Islands worked abroad. Fragmentary evidence indicates that the current population of Vanuatu is greatly reduced compared to pre-contact times.

It was at this time that missionaries, both Catholic and Protestant, arrived on the islands. Settlers also came, looking for land on which to establish cotton plantations. When international cotton prices collapsed, they switched to coffee, cocoa, bananas, and, most successfully, coconuts. Initially, British subjects from Australia made up the majority, but the establishment of the Caledonian Company of the New Hebrides in 1882 soon tipped the balance in favor of French subjects. By the turn of the century, the French outnumbered the British two to one.

The jumbling of French and British interests in the islands brought petitions for one or another of the two powers to annex the territory. In 1906, however, France and the United Kingdom agreed to administer the islands jointly. Called the British-French Condominium, it was a unique form of government, with separate governmental systems that came together only in a joint court. Melanesians were barred from acquiring the citizenship of either power.

Challenges to this form of government began in the early 1940s. The arrival of Americans during World War II, with their informal demeanor and relative wealth, was instrumental in the rise of nationalism in the islands. The belief in a mythical messianic figure named John Frum was the basis for an indigenous cargo cult (a movement attempting to obtain industrial goods through magic) promising Melanesian deliverance. Today, John Frum is both a religion and a political party with a member in Parliament.

The first political party was established in the early 1970s and originally was called the New Hebrides National Party. One of the founders was Father Walter Lini, who later became Prime Minister. Renamed the Vanua'aku Pati in 1974, the party pushed for independence; in 1980, the Republic of Vanuatu was created.