In 1893, only one year before the outbreak of the 1894-95 Sino-Japanese War, the Okinawan magistrate requested permission to place Diaoyu and various other islands under the jurisdiction of his prefecture Japanese internal and foreign affairs ministers postponed their reply for 12 months. Even by 1894, when the Sino-Japanese War broke out, the Japanese government, unsure of whether Japan would win the war, rejected the request by reasoning that "it is unclear whether or not the islands belong to the Empire".

However, shortly after the Japanese army occupied Lushun and blockaded the Qing navy in the Weihai Defensive Zone at the end of November 1894, the Japanese Meiji government was firmly convinced victory was at hand and proceeded to draft a treaty designed to pressure China into ceding Taiwan as a precondition for peace. At the same time, the Japanese secretly seized Diaoyu Islands without making any prior representations to the Chinese side. On December 27 that same year, Japanese Minister of Internal Affairs Yasushi Nomura sent a secret letter to Minister of Foreign Affairs Munemitsu Mutsu claiming that "the situation has changed" with regard to postponing the placement of markers on Kobi (Huangwei) and Chogyo islands, and "it is essential to strengthen management" over said islands. He stressed the necessity to review the situation in light of prevailing conditions. The Japanese Minister of Foreign Affairs raised no objections this time, and instead issued instructions reading, "Please handle appropriately in accordance with set plans." As a result, on January 14, 1896, just prior to the end of the war, the Japanese government adopted a "cabinet resolution" which placed the Diaoyu Island Chain under the jurisdiction of Okinawa, and approved the decision to erect markers on the islands. On April 17 that same year, China and Japan signed the Shimonoseki Treaty which forced China to cede Taiwan and neighboring islands. Japan then ruled Taiwan for over 50 years until its defeat in World War II. Diaoyu and various other islands surrounding Taiwan were also subjected to long-term occupation by Japan.

The post-World War II Sino-Japanese face-off concerning sovereignty over Diaoyu Island Chain represents a territorial dispute left behind by the United States.

The United Nations Supreme Command Headquarters issued Order No. 667 on January 29, 1946, shortly after US troops occupied Ryukyu. Article 3 clearly stipulated the extent of Japanese territory, namely Japan's four main islands-Hokkaido, Honshu, Shikoku and Kyushu, and 1,000-odd neighboring islands, including Tsu-shima and the Ryukyu Archipelago, located south of 30 degrees north latitude. The Diaoyu Island Chain was definitely not included.

On December 25, 1953, along with the emerging Cold War, the US government issued the Order No.27 defining the "geographical boundary lines of the Ryukyu Archipelago". The order noted that it was necessary to redefine said boundary lines "in accordance with the peace treaty signed with Japan on September 8, 1951". The territory defined by the order, all of which was under the jurisdiction of the US and Ryukyu governments, included all islands, islets, annular rocks, lithoherms and territorial waters in close proximity to the intersection 24 degrees north latitude and 122 degrees east longitude. The issuance of the order marked the illegal occupation of the Diaoyu Islands by the United States.

On June 17, 1971, Japan and the United States signed an agreement marking the return of Okinawa to the former. The extent of Japanese territory defined in the document - The US-Japanese Agreement on the Ryukyu Archipelago and Daito-jima - was identical to aforementioned Order No. 27 dated 1953. The Diaoyu Islands were sliced away and placed under the jurisdiction of Japan's Okinawa. The Japanese government used this as a basis to claim that the islands were part of Okinawa, and thus included the island chain and surrounding waters into the "air defense identification sphere" of its Self-Defense Forces. The fact that the United States handed the Diaoyu Islands over to Japan triggered a worldwide movement to defend the islands in the 1970s, involving Chinese the world over, including those in the United States.

The mounting pressure forced the U.S. government to issue a declaration in October 1971 which noted, "The State Department's position that the reversion treaty did not constitute US recognition of Japanese sovereignty over the Senkaku Islands, currently administered by the United States, was endorsed by the committee."

As late as September 11, 1996, U.S. State Department Spokesman Nicholas Burns stated: "The United States neither recognizes, nor supports the claim of any country to sovereignty over the Diaoyu Islands."