Bahrain - which name means "two seas" - was one of the first states in the Gulf to discover oil and to build a refinery. It never reached the levels of production enjoyed by Kuwait or Saudi Arabia, and so has had to diversify its economy.
The Muslim country is ruled by a Sunni king, whose family holds the main political and military posts. The divide between the Shia majority and the Sunni rulers has led to long-running tension in the kingdom, which has sporadically boiled over into civil disobedience.
The government called in the Saudi military to crush protests by demonstrators demanding a greater say in government in early 2011. Shia leaders have long alleged systematic discrimination in jobs and services.
Kingdom of Bahrain
Population 1.4 million
Area 717 sq km (277 sq miles)
Major language Arabic
Major religion Islam
Life expectancy 75 years (men), 76 years (women)
Currency Bahraini dinar
King: Sheikh Hamad bin Isa Al Khalifah
Sheikh Hamad, who has led the country since 1999, changed his title from emir to king when Bahrain became a kingdom in February 2002.
Born in 1950, he was educated at a public school in Cambridge, England, and went on to study at Mons Officer Cadet School in Aldershot, England, and at the US Army Command and Staff College, Fort Leavenworth, Kansas.
Under his leadership, the country has faced protests and civil unrest from the Shia majority, with demonstrators saying the ruling Sunni minority shuts them out of housing, healthcare and government jobs.
The Khalifa family has ruled since 1783. Bahrain is now a constitutional monarchy with an elected legislative assembly.
The media are under tight official control. The main TV and radio networks are state-run and newspapers follow a pro-government editorial line.
Media watchdog Freedom House says legislation is used to detain or jail critical journalists and online activists.
Bahrain has one of the highest rates of internet penetration in the Arab world.
Some key dates in Bahrain's history:
1602-1783 - Persian rule.
1783 - Rule by sheikhs of the Khalifah family.
1861 - Britain assumes responsibility for the Bahrain's defence and foreign relations.
1913 - Britain and the Ottoman government sign a treaty recognising the independence of Bahrain but the country remains under British administration.
1931 - The Bahrain Petroleum Company (Bapco), a subsidiary of the Standard Oil Company of California (Socal), discovers oil at Jabal al-Dukhan and production begins the following year.
1970 - Iran under the shah renounces claims to Bahrain, but the successor Islamic Republic of Iran does not recognise this renunciation.
1971 - Bahrain declares independence and signs a new treaty of friendship with Britain. Sheikh Isa becomes the first Emir and the Council of State becomes a cabinet.
2001 - February - Referendum on political reform; Bahrainis overwhelmingly back proposals under which Bahrain would become constitutional monarchy with elected lower chamber of parliament and independent judiciary.
2011 - Protesters gather in Manama, inspired by popular revolts that toppled rulers in Tunisia and Egypt. Saudi troops take part in a crackdown.