Taiwan, then more commonly known to the Western world as "Formosa", became a colony of the Empire of Japan after the Qing dynasty lost the First Sino-Japanese War in 1894 and ceded the island with the 1895 Treaty of Shimonoseki.

In November 1943, Chiang Kai-shek took part in the Cairo Conference with Franklin D. Roosevelt and Winston Churchill, who firmly advocated that Japan be required to return all of the territory it had annexed into its empire, including Taiwan and the Penghu (Pescadores) Islands.

Article 8 of the Potsdam Declaration, drafted by the United States, United Kingdom, and China in July 1945, reiterated that the provisions of the Cairo Declaration be thoroughly carried out, and the Japanese Instrument of Surrender stated Japan's agreement to the terms of the Potsdam Proclamation.

The implementation of the legal obligation to return Taiwan and its appertaining islands (including the Diaoyutai Islands) to the ROC was first stipulated in the Cairo Declaration, and later reaffirmed in the Potsdam Proclamation, the Japanese Instrument of Surrender, the San Francisco Peace Treaty, and the Treaty of Peace between the Republic of China and Japan.

The Cairo Declaration is therefore a legally binding instrument with treaty status.In November 1950, the United States Department of State announced that no formal act restoring sovereignty over Formosa and the Pescadores to China had yet occurred;[9] British officials reiterated this viewpoint in 1955, saying that "The Chinese Nationalists began a military occupation of Formosa and the Pescadores in 1945.