Italy's 1935 attack on Ethiopia led to a temporary Somali reunification. After Italian premier Benito Mussolini's armies marched into Ethiopia and toppled Emperor Haile Selassie, the Italians seized British Somaliland. During their occupation (1940-41), the Italians reamalgamated the Ogaden with southern and northern Somalilands, uniting for the first time in forty years all the Somali clans that had been arbitrarily separated by the Anglo-Italo-Ethiopian boundaries. The elimination of these artificial boundaries and the unification of the Somali Peninsula enabled the Italians to set prices and impose taxes and to issue a common currency for the entire area. These actions helped move the Somali economy from traditional exchange in kind to a monetarized system.

Thousands of Italians, either veterans of the Ethiopian conquest or new emigrants, poured into Somalia, especially into the interriverine region. Although colonization was designed to entrench the white conquerors, many Somalis did not fare badly under Italian rule during this period. Some, such as the Haaji Diiriye and Yuusuf Igaal families, accumulated considerable fortunes. One indicator of the Somali sense of relative wellbeing may have been the absence of any major anti-Italian revolt during Italy's occupation.

At the onset of World War II, Italian holdings in East Africa included southern Somalia, Ethiopia, and Eritrea. Italy subsequently invaded northern Somalia and ejected the British from the Horn of Africa. The Italian victory turned out to be short-lived, however. In March 1941, the British counterattacked and reoccupied northern Somalia, from which they launched their lightning campaign to retake the whole region from Italy and restore Emperor Haile Selassie to his throne. The British then placed southern Somalia and the Ogaden under a military administration.