Djibouti's military and economic agreements with France provide continued security and economic assistance. Links with Arab states and East Asian states, Japan and People's Republic of China in particular, also are welcome. Djibouti is a member of the Arab League, as well as the Organization of Africa Unity (OAU), and the Intergovernmental Authority on Development (IGAD).

Djibouti is greatly affected by events in Somalia and Ethiopia, and therefore relations are important and, at times, very delicate. The fall of the Siad Barre and Mengistu governments in Somalia and Ethiopia, respectively, in 1991, caused Djibouti to face national security threats due to the instability in the neighboring states and a massive influx of refugees estimated at 100,000 from Somalia and Ethiopia. In 2000, after 3 years of insufficient rain, 50,000 drought victims entered Djibouti. In 1996 a revitalized organization of seven East African states, the Intergovernmental Authority on Development (IGAD), established its secretariat in Djibouti. IGAD’s mandate is for regional cooperation and economic integration. In 1991 and 2000, Djibouti played a key role in the search for peace in Somalia by hosting Somali Reconciliation Conferences. In the summer of 2000, Djibouti hosted the Arta Conference which brought together various Somali clans and warlords. Djibouti's efforts to promote reconciliation in Somalia led to the establishment of the Transitional National Government (TNG) in Somalia. Djibouti hopes the TNG can form the basis for bringing peace and stability to Somalia.

With the Ethiopia-Eritrea war of 2000, Ethiopia channeled most of its trade through Djibouti. Though Djibouti is nominally neutral, it broke off relations with Eritrea in November 1998, renewing relations in 2000. Eritrea's President Isaias visited Djibouti in early 2001 and President Ismail Omar Guelleh made a reciprocal visit to Asmara in the early summer of 2001. While Djibouti’s President Ismail Omar Guelleh has close ties with Ethiopia’s ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF), he has tried to maintain an even hand, developing relations with Eritrea.

Djibouti has been the host country for French military units since independence. In 2002, United States units began operations from Djibouti with the aim of countering the possible threat of Islamic terrorism in the Horn of Africa.

Somalia has in the past claimed the areas of Djibouti inhabited by Somalis as part of the Greater Somalia idea.