Labuan was a part of the Brunei Sultanate.
In 1840 the British used the previously-uninhabited island as a base for operations against piracy and later as a station for the submarine cable between Singapore and Hong Kong. The Sultan of Brunei ceded Labuan to Britain in 1846, and the island became a Crown Colony in 1848. It was made a part of North Borneo on 1 January 1890, then on 30 October 1906 joined to the Straits Settlements. The first White Rajah of Sarawak, James Brooke was appointed commander-in-chief and Governor of the new territory.
During World War II, Labuan was occupied by Japan from December 1941 to June 1945 and governed as part of the Northern Borneo military unit by the Japanese 37th Army. Labuan was renamed Maida Island (Pulau Maida, 前田島 [Maeda-shima]) after Marquis Toshinari Maeda, the first commander of Japanese forces in northern Borneo. The island was retaken by Australian forces in the Borneo Campaign of 1945. Labuan assumed its former name and was under British military administration (along with the rest of the Straits Settlements), then joined to British North Borneo, on 15 July 1946, which in turn became a part of Malaysia as the state of Sabah in 1963.
In 1984, Labuan was ceded by Sabah to the federal government and made a federal territory. In 1990, it was declared an international offshore financial centre and free trade zone.