Humans were present in what is now Nicaragua as early as 8,000 BC, and it's believed that there were several subsequent migrations of people from what is now Mexico. When Spanish explorers arrived in 1522, they found large Native American settlements around Lake Nicaragua and Lake Managua. Colonization soon followed, and Spain ruled for the next 300 years. Nicaragua became a fully independent country in 1834.

In the 1850s, a U.S. citizen, William Walker, attempted his own takeover of Central America and was most successful in Nicaragua - he managed to make himself president. But two attempts to take over the rest of Central America failed. (He was finally tried and executed in Honduras.) Other parties, especially in the U.S., were also keeping an eye on the country in the late 1800s. One of the main reasons for their interest was Nicaragua's geography: The Rio San Juan and Lake Nicaragua were viewed as a possible route for a shipping canal that would connect the Caribbean Sea and the Pacific Ocean.

From the 1890s to the 1930s, various coups, rebellions and dictators were part of Nicaraguan politics. The U.S. sent troops on several occasions in an attempt to control the course of events. Anastasio Somoza became president in 1937 after ousting his rivals, including the rebel leader Augusto Sandino (who was assassinated). The Somoza family ruled Nicaragua for the next 40 years, amassing great wealth - they eventually owned a large portion of the country. Until the late 1970s, they enjoyed the continued support of the United States.

In 1972, a massive earthquake struck Managua, killing 6,000 people. International aid poured into the country, but the Somoza family was thought to have appropriated a good deal of it for themselves. This increased public opposition to their rule, and after an armed revolutionary uprising in 1978-79, the last Somoza president was removed from power.

A coalition government took over, but the Marxist Sandinistas (FSLN) soon forced all independent elements out. The Sandinistas managed to alleviate some of the nation's poverty by nationalizing banks, businesses and social services for the poor, but policies that denied free speech and a free market soon provoked opposition.

The most powerful opposition came from the U.S., where President Ronald Reagan suspended all aid to Nicaragua and okayed the financing and training of the Contras - counterrevolutionary armies that attacked Nicaragua from bases in Honduras and Costa Rica.

After almost a decade of Contra attacks and a crippling economic embargo by the U.S., the FSLN Sandinistas were voted out of power in 1990, and the warfare came to an end. One of their candidates, Herty Lewites, was elected mayor of Managua in 2000.

The current president, the conservative Arnoldo Aleman, has pledged to get tough on corruption, return private property that was nationalized during the revolution and create an inviting environment for foreign business and investment capital. Aleman has his work cut out for him. Nicaragua is one of the hemisphere's poorest countries, inflation and unemployment are high, and the government remains very dependent on foreign aid. But there are some signs of hope. In the late 1990s, Nicaragua's economy showed respectable growth, and in early 2001, the IMF and World Bank announced that they would absolve US$4.5 billion of Nicaragua's debt - pending key economic reforms.