During the 7th-14th centuries, the buddhist kingdom of Srivijaya flourishes on Sumatra. At its peak, the Srivijaya Empire reaches as far as West Java and the Malay peninsula. Also by the 14th century, the hindu Kingdom of Majapahit Empire had risen in eastern Java. Gadjah Mada, the empire's chief minister from 1331 to 1364, succeeds in gaining allegiance from most of what is now modern Indonesia and much of the Malay archipelago as well. Islam arrives in Indonesia sometime during the 12th century and, through assimilation, supplantsHinduism by the end of the 16th century in Java and Sumatra. Bali, however, remains overwhelmingly Hindu. In the eastern archipelago, both Christian and Islamic proselytizing take place in the 16th and 17th centuries.

In the 16th century Portugal (in 1510)and the Netherlands (in 1596) establish settlements. Beginning in 1602, the Dutch slowly establish themselves as rulers of present-day Indonesia, exploiting the weakness of the small kingdoms that had replaced that of Majapahit. During 300 years of Dutch rule, the Dutch developed the Netherlands East Indies or Netherlands India into one of the world's richest colonial possessions. The colony is under control of the Netherlands East Indian Company and in 1798 the possesions of the company are taken over by the Netherlands. Between 1811 and 1816 the colony is temporarely under control of the British East India Company, but Dutch rule is restored in 1816. During the first decade of the 20th century, an Indonesian independence movement begins and expands rapidly, particularly between the two World Wars. Its leaders come from a small group of young professionals and students, some of whom had been educated in the Netherlands. In 1918 the colony is granted limited forms of self-government but Dutch authorities act against the independence movements.

Japan occupies the colony between 1942 and 1945. Shortly after the Japanese surrender to the Allies in 1945 a small group of Indonesians, led by Soekarno and Mohammad Hatta, proclaim independence and establish the Republic of Indonesia. They set up a provisional government and adopt a constitution to govern the republic until elections could be held and a new constitution written. Dutch efforts to reestablish complete control meat strong resistance.

After 4 years of warfare and negotiations, the Dutch transfer sovereignty in 1949 to the federal Republic of the United States of Indonesia. Soekarno becomes president of this federal republic and he replaces the federation in 1950 by the unitary Republic of Indonesia. Parliament is divided among many political parties before and after the country's first nationwide election in 1955 and stable governmental coalitions are difficult to achieve. The role of Islam in Indonesia becomes a divisive issue. Soekarno defends a secular state based on Pancasila while some muslim groups prefer either an islamic state or a constitution which included preambular provision requiring adherents of islam to be subject to islamic law.

After 1955 the government of president Soekarno becomes increasingly authoritarian. Unsuccessful rebellions on Sumatra, Sulawesi, West Java and other islands beginning in 1958, plus a failure by the constituent assembly to develop a new constitution, weakens the parliamentary system. Consequently in 1959, when Soekarno unilaterally revives the provisional 1945 constitution, which gives broad presidential powers, he meats little resistance. From 1959 to 1965 Soekarno imposed an authoritarian regime under the label of "Guided Democracy." Only parties loyal to his Parti Nasional Indonesia (Indonesian National Party, PNI) are allowed. The former Dutch colony of West Papua gets in 1963 under Indonesian temporary authority, in 1969 followed by formal annexation. In the late 1950s and early 1960s Soekarno moves closer to Asian communist states and toward the Parti Komunis Indonesia (Indonesian Communist Party, PKI) in domestic affairs.

In 1965 PKI sympathizers within the military, including elements from Soekarno's palace guard, occupy key locations in Jakarta and kidnap and murder six senior generals. Soeharto, the commander of the army strategic reserve, rallies army troops opposed to the PKI to reestablish control over the city. Violence sweaps throughout Indonesia in the aftermath of these 1 events and unsettled conditions persisted through 1966. Tens of thousands of alleged communists in rural areas are murdered: estimates of the number of deaths range between 160,000 and 500,000. In 1967 Soeharto becomes acting president. Soekarno ceases to be a political force and lives under virtual house arrest until his death in 1970. Under Soeharto, starting 1967, Indonesia becomes a dictatorship under a facade of parliamentary government. Soeharto changes the party system and founds the Functional Groups, or Golongan Karya (Golkar). Soeharto becomes president in 1968 and is re-elected by parliament in 1973, 1978, 1983, 1988, 1993, and 1998. Under his rule Indonesia annexes in 1975 former Portuguese Timor.

In 1997 Indonesia is afflicted by the Asian financial and economic crisis, accompanied by the worst drought in 50 years and falling prices for oil, gas, and other commodity exports. The rupiah plummetes, inflation soars and capital flight accelerates. Demonstrators, initially led by students, call for Soeharto's resignation. Amidst widespread civil unrest, Soeharto resigns in 1998. Soeharto's hand-picked vice president, Bacharuddin Jusef Habibie, becomes Indonesia's third president. Parliamentary elections are held 1999, in which 48 parties compete. International and domestic observers and monitors declare that the elections, while not problem-free, are free and fair. The Parti Demokrasi Indonesia Perjuangan (PDI-P, Indonesian Democratic Party of Struggle, PDI-P led by Megawati Soekarnoputri) becomes the largest party, but without an absolute majority. Abdurrachman Wahid of the Partai Kebangkitan Bangsa (National Awakening Party, PKB) is electe president by parliament in 1999, but replaces hem with Megawati Soekarnoputri in 2001. That year Indonesia accepts the independence of East Timor.