The first discovery of the Falklands is confused. There are claims that a number of Spanish explorers discovered them in the early 1500s, while the British claim that the explorer John Davies found them in 1592. The first authenticated discovery was made by a Dutch explorer, Sebald van de Weert, in 1600. In a very modest move, he named the islands the 'Sebaldes', but did not land. The first landing had to wait until 1690, when the British captain John Strong visited the islands. He named the islands after Viscount Falkland, a nobleman who was to become the First Lord of the Admiralty.

The next major happening regarding the islands was a 1748 plan by the Royal Navy to establish a base there. The Spanish objected to this, as they believed they had a claim to the islands. This claim ultimately derived from the 1494 Treaty of Tordesillas, which gave the Spanish control over the New World west of a line running between the poles 370 leagues west of the Cape Verde islands; Portugal had claim over the New World east of the line. The Falklands fell on the Spanish side of the line, and the British had accepted the validity of the Treaty of Tordesillas in a number of treaties, including the 1670 Treaty of Madrid and 1713 Treaty of Utrecht. While there was some pushback from the British on the Spanish claim, the British did not want to upset the Spanish as there were important commercial treaties also being negotiated at the same time. The French had no such qualms. In 1764, following the loss of a number of colonies in the Americas at the end of the Seven Years War, they established the first settlement on the islands. An expedition under Antoine de Bougainville founded the town of Port Louis on East Falkland, near the present capital of Port Stanley. When the Spanish learned of the settlement, though, they responded in the same way as they had to the British. Ultimately, the French, unwilliing to fight another war so soon after the Seven Years War, backed down. In October 1766, they transferred Port Louis to Spain, in return for a large sum of money. Meanwhile, the British were conducting more expeditions to the islands. In January 1765, Commodore John Byron landed on West Falkland and claimed the island for Britain. In January 1766, they established a settlement at Port Egmont. At first, the British and French settlements do not seem to have encountered each other, or known about each other's presence. When the British did learn of Port Louis, they called for the French to leave, but to little avail. After the Spanish took control of Port Louis (renamed Puerto de Soledad), they began to demand that the British leave the islands. The British refused until June 1770 when the Spanish turned up with five warships and 1,400 troops to kick them out. The British protested, and began preparing for war, leading to a Spanish climb-down in January 1771; the British were allowed to reestablish their settlement, but the Spanish did not recognise their further claims over the islands. In 1774, the British abandoned Port Egmont, allowing them to divert their resources to the more important colonies further north.

On departing the islands, the British settlers left a plaque which stated that this departure did not represent Britain giving up their claim to the islands. The Spanish would then use the islands as a prison colony, with a typical population of ~100 people. There was little interest in the islands in the Spanish government, but they were careful to maintain their claim to them. The Spanish removed the plaque in 1775, with the aim of ensuring that the British never returned to the islands. A key task of the island's governors was to 'prevent British sailors and fishermen from settling anywhere'. In 1790, the St. Lawrence Convention gave Britain fishing rights in the Pacific, in return for a promise not to settle in South America or the islands off its coast; this included the Falkland Islands. This state of affairs continued until the Napoleonic Wars. In 1806, following a British invasion of the River Plate, the Spanish governor of the Falklands left the islands. In 1811, the Spanish left the islands for good. Like the British, they left a plaque claiming sovereignty over the islands.

After this, the islands were left with no permanent population. Meanwhile, on the mainland of South America, the Spanish colonies south of the River Plate had been working towards a split from Spain. In 1816, they declared independence, forming the United Provinces of Rio de la Plata, later to become Argentina. Argentina claimed, amongst other territories, the Falkland Islands. These had been part of the Vice-Royalty of the River Plate, to which Argentina claimed to be a successor. Acting on this claim, an Argentine representative raised their flag at Puerto de Soledad in 1820. This representative, the American Colonel Daniel Jewett, forced non-Argentine fishing vessels off the island. A governor was appointed, but does not seem to have visited the islands. A parcel of land on East Falkland was given to a man named Louis Vernet in 1823, who began to set up a full settlement. In 1829, Vernet was appointed governor of the islands, with full political and military control. Vernet used this control to kick out a number of foreign fishing vessels. He seized three American ships, with the captain of one being taken to Buenos Aires for trial. This prompted a reprisal from the American USS Lexington, which destroyed the Argentinian colony on the islands and declared them free of government. Once the news reached Britain, they sent two warships, HMS Clio and Tyne, to reclaim the islands for Britain. They reached Port Egmont in December 1832, and began to re-establish the colony there. While they sailed south, the Argentine government attempted to retain control over the islands. A new governor, Juan Mestivier, was sent to the islands with the gunboat ARA Sarandi. Mestivier reestablished the colony, but was killed in a mutiny two months after the Sarandi left. Sarandi returned to the islands to destroy the mutiny, but arrived at Puerto de Soledad the same time as the British expedition. With superior force available, the British force was able to persuade the captain of the Sarandi to withdraw the Argentine colony and hand the islands over to Britain. The British claim that this was legitimate; the Argentines see it as coercive. Following this, the British established their own colony on the islands, which would remain there to the present day.

Over the next 150 years, the Argentine government would make repeated protests over the control of the islands. It was generally agreed by legal experts that Argentina had a better claim pre-1833. However, as time wore on, the British claim became more secure. Thanks to Britain's long-term, peaceful and undisturbed control over the islands, it became hard to argue that they did not have a claim to the islands. As the principle of self-determination became accepted in the years following WWII, the islands were almost undisputably British. The population of the islands saw themselves as British, and would vote that way in any referendum on ownership. The Argentine government still rejected the claim, though. The islands were seen as an integral part of Argentine territory. They were also a useful tool to drive nationalistic sentiments in Argentina. This was why the Argentines invaded in 1982. The Junta, under Galtieri, were suffering domestically. They were fighting the so-called 'Dirty War' against left-wing opposition within the country, torturing and disappearing dissidents. They were overseeing a period of prolonged economic stagnation, making them more unpopular and driving the opposition; it was quite possible that they would soon face a general strike. Meanwhile, the British seemed to be making noises that indicated that they would not fight over the islands. The Nott Defence Review of 1981 represented a draw-down in the Royal Navy's strength, with a more extreme focus on the North Atlantic than previously existed. The RN's presence in the South Atlantic, the patrol ship Endurance, was to be sold. The British had also missed Argentine suggestions that force might be used over the islands in prior negotiations. The lack of response to these threats indicated that no response to any actions would be forthcoming. Previously, the international community had not stood by colonial powers in similar situations, such as the Indian invasion of Goa or the Suez Crisis.

This was a misreading of the situation. Thatcher's government was not entirely popular at home either. Britain was undergoing serious economic stress, and the Labour party had been polling ahead of the Conservatives for much of 1981. Letting the Falklands slip into the hands of the Argentine Junta would have been hugely unpopular; it would put people who saw themselves as British into the hands of a murderous dictatorship. It would be a blow to Britain's prestige, and encourage other governments (such as that of Guatemala) to take British territory. The use of force to recapture the islands had bipartisan support, with Thatcher stating that "We cannot allow the democratic rights of the islanders to be denied by the territorial ambitions of Argentina", while Michael Foot, leader of the Labour Party, argued that Britain had "a moral duty, a political duty and every other kind of duty" to the Falkland Islanders. Thatcher also knew that she could depend on the support of the USA if she needed it, as well as the general support of the international community. The Dirty War had made Argentina something of a pariah state, and the invasion was a clear act of agression; the UN was on Britain's side.