The Free Territory of Trieste (Italian Territorio Libero di Trieste, Slovenian Svobodno tržaško ozemlje, Serbo-Croatian Slobodna teritorija Trsta) was a neutral state of 738km² with 333,556 inhabitants (266,311 Italians, 48,714 Slovenes and Croats, 18,531 others) consisting of the city of Trieste and a narrow strip of coastal land connecting it to Italy, Slovenia, and Istria. Established after World War II in 1947 as a part of the Treaty of Peace With Italy, it was formally dissolved and divided between Italy and Yugoslavia in 1954.

In 1921 Italy formally annexed parts of Austria-Hungary it captured in World War I, including the cities of Trieste, Rijeka, Istria and what is now southwestern Slovenia. The rural area was populated by Slovenes in the north and by Croats in the southeast, while a large numbers of Italians lived in Trieste and Rijeka and in the towns of Istria. During the 1920s and 1930s the Slavic population complained of a severe Fascist Italianization and discrimination under Rome's regime. They were also exposed to acts of violence committed by Fascists, for example burning the building of the Slovene National Club (Narodni Dom) in Trieste on July 13, 1920, as an immediate answer to killing two Italian sailors by Yugoslav gendarmerie in the course of riots in Split.

Italy fought with the Axis powers in World War II. When the Fascist regime collapsed in 1943 and Italy capitulated, Slovenia and Croatia (that were to become parts of the Yugoslavia) tried to annex the territory, but German forces occupied it. The Yugoslav 4th Army together with the Slovene 9th Corpus NOV captured Trieste on May 1 1945. New Zealand and British Allied forces arrived on the next day. Under international pressure, Yugoslav troops left Trieste on June 12

On February 10, 1947, a peace treaty was signed with Italy, establishing the Free Territory of Trieste. The territory was, however, divided into two zones: Zone A, which was 222.5 km² and had 262,406 inhabitants (211,660 Italians, 32,427 Slovenes and 18,319 others) including Trieste, which was administered by British/American forces, and Zone B, which was 515.5 km² with 71,000 inhabitants (54,651 Italians, 16,287 Croats and Slovenes) including northwestern Istria, and which was administered by Yugoslav National Army. The Territory thus never functioned as a real independent state. Even so, its formal status was respected and it issued its own currency and stamps.

In 1954 a "Memorandum of Understanding " was signed in London. It gave a provisional civil administration of Zone A (with Trieste) to Italy and Zone B to Yugoslavia. In 1975 the Treaty of Osimo was signed in Osimo , definitively dividing the former Free Territory of Trieste between Italy and Yugoslavia.

During the late 1940s and in the years following the division of the territory, up to 40,000 Italians chose to leave the Yugoslav B zone and move to the A zone or Italy for various reasons - some were intimidated into leaving and some simply preferred not to live in Yugoslavia. In Yugoslavia, the people who left were called optanti, while they call themselves esuli (forced emigrants), or the exiles. About 14,000 Italians chose to remain in the Yugoslav zone, now part of Slovenia and Croatia.