The ongoing contention between Mauritius and the UK over the sovereignty of the Diego Garcia presents a difficult challenge for Indian foreign policy-makers. New Delhi’s principled opposition to colonialism and its historical relationship with Port Louis has made it steadfastly support the Mauritian claim. However, such principled foreign policy militates against India’s quest to balance the growing Chinese influence in the Indian Ocean. Insofar, Diego Garcia allows the US Navy to maintain an active presence in the Indian Ocean, thereby keeping the Chinese naval power at bay. Balance of power considerations notwithstanding, the expanding trajectory of the Indo-US strategic partnership also demands New Delhi to weigh the burden of its policies on Diego Garcia carefully. This article juxtaposes India’s historical record on Diego Garcia during the Cold War with its contemporary approach to the issue. In doing so, it sheds further light on India’s strategic decisionmaking in the Indian Ocean, its dilemmas in confronting a genuinely hostile maritime power in the region, and deliberates on potential options for dispute resolution which can not only satisfy Mauritian demands but also ensure a healthy balance of power in the Indian Ocean.