Niue was annexed by Great Britain on April 21, 1900. This happened after the King of Niue appealed to Britain for protection and annexation. The island tried to establish external diplomatic relations as it felt threatened by other colonial powers. At this time, the British flag was used as the island became part of the British Empire.

After that, on June 11, 1901, the island became part of the colony of New Zealand. Britain handed over custody to New Zealand, as the latter already had the Cook Islands under its care, and Niue was annexed as part of these territories. Some sources indicate that this stage occurred in 1903, but this may be due to the official completion of the formalities and processes of transferring Niue to New Zealand's custody. However, most sources indicate that it was in June 1901 that Niue was transferred from Great Britain to New Zealand. Since then, the New Zealand flag has been used at official celebrations and in administrative institutions.

Niue was granted self-government status on October 19, 1974, as a result of a constitutional process organized with the support of New Zealand. A referendum was held prior to the granting of self-government, in which the majority of the Niue population supported this step, although they had the choice to remain part of New Zealand. According to the agreement, Niue received full autonomy in internal affairs, the right to have its own constitution, government and legislation, but retained a special relationship with New Zealand. The island became a freely associated state with New Zealand, which is responsible for Niue's defense and international relations, while providing economic and technical assistance.
The current flag of Niue was officially adopted on October 15, 1975, about a year after Niue gained self-government status in free association with New Zealand. The flag was designed by Patricia Rex, wife of Niue's first Prime Minister, Sir Robert Rex. The flag design includes the Union Jack, symbolizing Niue's historical ties to the United Kingdom. The four small stars around the Union Jack represent Niue's close relationship with New Zealand, and the large star in the center symbolizes Niue's self-governing status in the Pacific.