It was founded in 2001 by Prime Minister Laisenia Qarase as a power base; it absorbed most of the Christian Democratic Alliance and other conservative groups, and its endorsement by the Great Council of Chiefs (Bose Levu Vakaturaga) caused it to be widely seen as the successor to the Alliance Party, the former ruling party that had dominated Fijian politics from the 1960s to the 1980s.

There was a strong focus however on reducing the economic gap between the different ethnic communities, which continued to be a controversial issue for many commentators who accused the SDL of blatant racism.

At its annual conference on 27 May 2005, the SDL strongly endorsed Prime Minister Qarase's controversial proposals to establish a Reconciliation and Unity Commission with powers, subject to presidential approval, to compensate victims and pardon perpetrators of the coup d'état that deposed the elected government in 2000.

The NFP accuses the SDL of having broken the agreement by forging a coalition in 2004 with the Fiji Labour Party to retain the Mayoralty.

The election was a bittersweet experience for the SDL; they gained a majority in their own right in Suva, but lost control of Nasinu, Fiji's largest municipality.

The party's general secretary, Jale Baba, had earlier said that the SDL was dissatisfied with the performance of about a third of its parliamentarians, and that they would not be nominated for another term.

On 27 February 2006, Baba, no longer general secretary but now coordinator of the election campaign, said that the selection process had begun and would take two to three weeks.

SDL National Director Jale Baba announced on 11 September 2005 that the party would contest all 71 parliamentary seats in the 2006 election.

Baba said that byelections showed that Indo-Fijian support for the SDL had increased since 2001, when it hardly registered, and that the party was confident of winning most of the seats in 2006.

On 2 October, Baba said that members of all ethnic communities, including Indo-Fijians, had applied for nomination, which he described as "a major change" for a party hitherto dominated by indigenous Fijians.

Citing confidentiality rules, Baba refused to name them, but said they were all Indo-Fijians, bringing to 48 the number of ethnic Indians who would stand in the primary elections to choose SDL candidates in the third week of February.

The NFP said in August 2005 that it would withhold its preferences from the SDL unless it withdrew its controversial Reconciliation, Tolerance, and Unity Bill, but Qarase expressed the hope that "good sense" would prevail.

Aiming to establish a commission with the power to compensate victims and pardon perpetrators of the 2000 coup, the legislation has been branded by opponents as a thinly-veiled legal mechanism for freeing supporters of the present government, who have been convicted and imprisoned on coup-related charges.

On 30 July 2005, the SDL joined the Grand Coalition Initiative Group, an electoral alliance of predominantly indigenous Fijian parties that agreed to share preferences in the 2006 election.