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The Liechtenstein family, of Austrian origin, acquired the fiefs of Vaduz and Schellenberg in 1699 and 1713 respectively, and gained the status of an independent principality of the Holy Roman Empire in 1719 under the name Liechtenstein. The French, under Napoleon, occupied the country for a few years. Napoleon was the founder of the Rhine Confederation in 1806 and accepted Liechtenstein as a member. Liechtenstein considers itself therefore to be a sovereign state since 1806. In 1815 within the new German Confederation, Liechtenstein could prove its independence once more. In 1868, after the German Confederation dissolved, Liechtenstein disbanded its army of 80 men and declared its permanent neutrality, which was declared during both world wars.

In 1919, Liechtenstein and Switzerland concluded an agreement whereby Switzerland assumed representation of Liechtenstein's diplomatic and consular interests in countries where Switzerland maintains representation and Liechtenstein does not. According to an agreement concluded with Austria in 1979, Liechtenstein citizens may seek consular assistance from Austrian representatives abroad in countries in which neither Liechtenstein nor Switzerland maintain representation. After World War II, Liechtenstein became increasingly important as a financial center, resulting in more prosperity. In 1989, Prince Hans Adam II succeeded his father to the throne and in 1996 settled a long-running dispute with Russia over the Liechtenstein family's archives, which had been confiscated during the Soviet occupation of Vienna in 1945 and later moved to Moscow. Liechtenstein has been a participating state of the Organization for Security and Cooperation in Europe (OSCE) since the 1975 start of its predecessor, the Conference on Security and Cooperation in Europe (CSCE). Liechtenstein became a member of the Council of Europe in 1978 and joined the UN in 1990, the European Free Trade Association (EFTA) in 1991, and both the European Economic Area (EEA) and World Trade Organization (WTO) in 1995.