With the opening of the Suez Canal in 1869, Eritrea took on new significance as it offered a secure port on the new trade route from the Mediterranean to the east. The Italian Societa di Navigazione Rubattino company purchased the Port of Assab along with stretches of the coastline on 15th November that year from the local Sultan. Italian influence and control of Eritrea continued over the next few decades. In 1889 Ethiopian Emperor John IV died in fighting against an army from Sudan and was replaced by Emperor Menelik who saw advantage in developing a friendship with the Italians by signing the Treaty of Uccialli in 1889 which effectively recognised Italian 'ownership' of Eritrea along with territories around Keren, Massawa and Asmera in northern Ethiopia in exchange for 30,000 muskets and 28 cannons to secure his own position.

It was this treaty that was to prove so contentious in later years as Ethiopia saw the treaty as a mechanism for calling upon Italian military support when required, whilst the Italians saw it as a recognition that Ethiopia was effectively an Italian protectorate. So concerned was Menelik that he tore up the treaty four years later and marched 70,000 troops into Eritrea inflicting one of the most disastrous and bloody defeats on a colonial power throughout Africa's colonial history above). A peace treaty was signed in Addis Ababa in 1896 in which Italy acknowledged Ethiopia as a fully independent state and the border between Ethiopia and Eritrea was defined as the Mareb river. Italy then began its colonial rule in Eritrea in earnest concentrating its energies on taking land from the indigenous population and giving to to Italian incomers. However Eritrea was on the wrong side of the allies in World War II. The British defeated the Italian Army there in 1941 and placed the colony under British military control.