During World War II, the Spanish State under Francisco Franco espoused neutrality as its official wartime policy. This neutrality wavered at times and "strict neutrality" gave way to "non-belligerence" after the Fall of France in June 1940. Franco wrote to Adolf Hitler offering to join the war on 19 June 1940 in exchange for help building Spain's colonial empire. Later the same year Franco met with Hitler in Hendaye to discuss Spain's possible accession to the Axis Powers. The meeting went nowhere, but Franco did help the Axis—whose members Italy and Germany had supported him during the Spanish Civil War (1936–1939)—in various ways.

Despite ideological sympathy, Franco even stationed field armies in the Pyrenees to deter Axis occupation of the Iberian Peninsula. The Spanish policy frustrated Axis proposals that would have encouraged Franco to take British-controlled Gibraltar. Much of the reason for Spanish reluctance to join the war was due to Spain's reliance on imports from the United States. Spain also was still recovering from its civil war and Franco knew his armed forces would not be able to defend the Canary Islands and Spanish Morocco from a British attack.

In 1941 Franco approved the recruitment of volunteers to Germany on the guarantee that they only fight against the Soviet Union and not against the western Allies. This resulted in the formation of the Blue Division which fought as part of the German army on the Eastern Front between 1941 and 1944.

Spanish policy returned to "strict neutrality" as the tide of war started to turn against the Axis. American pressure in 1944 for Spain to stop tungsten exports to Germany and to withdraw the Blue Division led to an oil embargo which forced Franco to yield. After the war, Spain was not allowed to join the newly created United Nations because of the wartime support for the Axis, and Spain was isolated by many other countries until the mid-1950s.