The island was originally chosen by the British as a comparatively isolated and healthier alternative to the disease-ridden larger islands of the Solomons. The Japanese occupied it on 3 May 1942, with the intention of setting up a seaplane base nearby, and the ships in Tulagi harbor were raided by planes from the USS Yorktown the following day, in a prelude to the Battle of the Coral Sea. US forces landed on 7 August and captured Tulagi after a day of hard fighting.
The present-day Tulagi has a fishing fleet and is developing a scuba diving industry; the wrecks of the USS Aaron Ward, USS Kanawha, and HMNZS Moa are close by, and the wrecks of Ironbottom Sound are not much further off.