From the late 1980s and early 1990s, boats carrying asylum seekers, mainly departing from Indonesia, began landing on the island. In 2001, Christmas Island was the site of the Tampa controversy, in which the Australian government stopped a Norwegian ship, MV Tampa, from disembarking 438 rescued asylum-seekers. The ensuing standoff and the associated political reactions in Australia were a major issue in the 2001 Australian federal election.
The Howard government operated the "Pacific Solution" from 2001 to 2007, excising Christmas Island from Australia's migration zone so that asylum seekers on the island could not apply for refugee status. Asylum seekers were relocated from Christmas Island to Manus Island and Nauru. In 2006, an immigration detention centre, containing approximately 800 beds, was constructed on the island for the Department of Immigration and Multicultural Affairs. Originally estimated to cost A$276 million, the final cost was over $400 million.
In December 2010, 48 asylum-seekers died just off the coast of the island in what became known as the Christmas Island boat disaster when their boat hit the rocks near Flying Fish Cove, and then smashed against nearby cliffs.
In the case Plaintiff M61/2010E v Commonwealth of Australia, the High Court of Australia ruled, in a 7–0 joint judgment, that asylum seekers detained on Christmas Island were entitled to the protections of the Migration Act. Accordingly, the Commonwealth was obliged to afford asylum seekers a minimum of procedural fairness when assessing their claims.
As of 20 June 2013, after the interception of four boats in six days, carrying 350 people, the Immigration Department stated that there were 2,960 "irregular maritime arrivals" being held in the island's five detention facilities, which exceeded not only the "regular operating capacity" of 1,094 people, but also the "contingency capacity" of 2,724.
The Christmas Island Immigration Reception and Processing Centre closed on 30 September 2018.
On 13 February 2019 the Morrison government announced it would re-open the centre, after Australia's parliament passed legislation giving sick asylum seekers easier access to mainland hospitals.
During the COVID-19 pandemic, the government opened parts of the Immigration Reception and Processing Centre to be used as a quarantine facility to accommodate Australian citizens who had been in Wuhan, the point of origin of the pandemic. The evacuees arrived on 3 February. They left 14 days later to their homes on the mainland.