By 1900 Belize had become an integral, though minor, colony of the British Empire. Complacency set in amongst the predominantly white property owners, while the black workers in the forests and on the estates - the descendants of former slaves, known as "creoles" - continued to suffer low wages and restricted freedom of movement. Despite this, Belizeans rushed to defend the "Mother Country" in both world wars , but each time the returning soldiers faced humiliation and poverty. In 1919 veterans rioted in Belize City, an event that marked the onset of black consciousness and the beginning of the independence movement . Despite this, little changed, and even after World War II political power still lay with a wealthy elite and with the governor, a Foreign Office appointee, while the devaluation of the British Honduras dollar at the end of 1949 caused additional hardship. The days of the British Empire were numbered, however, and in 1954 elections were held in which all literate adults over the age of 21 could vote. These elections were won with an overwhelming majority by the Peoples' United Party (PUP), led by George Price .

However, Guatemala , as the inheritor of the Spanish colonial territory of that name, had never entirely let go of its claim to the territory of Belize, regarding colonial treaties giving the British settlers rights to cut wood but not to own the land as still applicable in law. These interminable disputes, particularly the 1859 treaty which Britain, despite failing to fulfil the provision to build a road allowing Guatemala access to the Caribbean, regarded as the final settlement of the boundary dispute, rumbled on in the background. The British government never took the Guatemalan claim very seriously and Belize was allowed to proceed down the road to full independence by becoming an internally self-governing colony in 1964.

The prospect of what was (notionally at least) the department of "Belice" becoming independent outraged Guatemalan national pride and at least twice, in 1972 and 1977, Guatemala moved troops to the border and threatened to invade, but prompt British reinforcements offered an effective dissuasion. The situation remained tense but international opinion shifted gradually in favour of Belizean independence.

The most important demonstration of the worldwide endorsement of Belize's right to self-determination was the UN resolution passed in 1980, which demanded secure independence, with all territory intact, before the next session. Further negotiations with Guatemala began but complete agreement could not be reached: Guatemala still insisted on some territorial concessions. On March 11, 1981, Britain, Guatemala and Belize released the "Heads of Agreement", a document which would, they hoped, eventually result in a peaceful solution of the dispute. Accordingly, on September 21, 1981, Belize became an independent member of the British Commonwealth , with Queen Elizabeth II as its head of state.