Trieste was seized in 1943 by the Germans, who intended to maintain it as a southern outlet to the sea for the Third Reich. It was occupied by Marshal Tito's troops in 1945, however, and was claimed for Yugoslavia. The peace treaty with Italy signed in Paris in 1947 created the Free Territory of Trieste, to be guaranteed by the United Nations Security Council. It was divided temporarily into northern and southern zones: Zone A, which included the city and its northern hinterland, was put under U.S.-British military administration, and Zone B, to the south of the city, was put under Yugoslav administration.

The Free Territory status was unworkable, however, and deadlock immediately followed the ratification of the treaty. After the failure of British and U.S. proposals to include the Free Territory in Italy (1948) or to divide it between Italy and Yugoslavia on the existing zonal basis (1953), negotiations in 1954 resulted in an agreement granting Zone B and part of Zone A to Yugoslavia (202 square miles [523 square km]) and the city of Trieste and the remainder of Zone A (91 square miles [236 square km]) to Italy. Italy agreed to maintain Trieste as a free port, and the Italian and Yugoslav governments agreed to a special statute regulating the rights of national minorities on both sides of the demarcation line. By an October 1975 treaty, Italy relinquished all claims to Zone B, settling finally the status of the region.