B-1B Lancer Bombers on Diego Garcia
During the Cold War era, the United States was keen on establishing a military base in the Indian Ocean. Because of Diego Garcia's proximity to India, the United States saw the island as a strategically important one. U.S. military activities in Diego Garcia have caused friction between India and U.S. in the past. Various political parties in India repeatedly demanded that the U.S. dismantle the military base as they saw U.S. naval presence in Diego Garcia as a potential threat to India's dominance of the Indian Ocean.

After the end of the Cold War, relations between India and U.S. improved dramatically. Diego Garcia was the site of several naval exercises between the U.S. and Indian Navy held between 2001 and 2004.

Diego Garcia is also located relatively close to the Middle East, and experienced rapid military build-ups during the beginnings of the Iranian revolution and the Iraqi invasion of Kuwait.

Diego Garcia has several current missions. U.S. Air Force bombers and air refueling planes operate from the 3,650 m (12,000 ft) runway, and the USAF Space Command has built a satellite tracking station and communications facility.

The atoll shelters the 14 ships of Marine Prepositioning Squadron Two. These ships carry the equipment and supplies to support a major armed force with tanks, armored personnel carriers, munitions, fuel, spare parts and even a mobile field hospital. This equipment was used during the Persian Gulf War, when the Squadron quickly delivered its equipment to Saudi Arabia. There, soldiers flown on air transports from U.S. and European bases quickly unloaded and deployed the pre-positioned material.