When the Malaysian peninsula came under British rule in 1913, its economy prospered and its Indian and Chinese immigrant populations increased significantly. However, this boom was drastically reversed by the onset of WWII and the Japanese invasion of British Malaya. Within one month Kuala Lumpur had fallen to the Japanese, who soon defeated the British at Singapore. During its occupation, many of Kuala Lumpur's Chinese population were tortured and killed and many Indians were sent to work on Burma's 'Death Railway'. When the Japanese were finally defeated, the British temporarily returned to Kuala Lumpur, only to be ousted when Malaysia finally declared its independence in 1957 in KL's Dataran Merdeka (Freedom Square). The city officially became the independent Federal Territory of Kuala Lumpur when it was ceded by the sultan of Selangor state in 1974.

Malaysia was gripped by the Asian economic crisis that began in Thailand in 1997. This crash was the first significant glitch in the otherwise bullish Malaysian economy since WWII. The staging of the Commonwealth Games in 1998 was seen as a feather in Malaysia's cap, and helped restore some national confidence. Despite the economic downturn of the late 1990s, Kuala Lumpur continued to develop on a monumental scale. Today KL is not only Malaysia's political and commercial capital, but also its most populous and prosperous city.