In the late 1800s, the British North Borneo Company (BNBC) began to establish colonies throughout North Borneo. In 1882 the Company founded a small settlement in the area known as Gaya Bay which was already inhabited by Bajau people. The first settlement was on Gaya Island. In 1897, this first settlement was burned and destroyed by the indigenous Bajau freedom fighter Mat Salleh.
After the destruction, the Company decided to relocate the settlement to a more easily defended mainland at Gantian Bay (now Sepanggar Bay) in 1898. However it was found to be unsuitable. In 1899, Mr. Henry Walker, a Land Commissioner identified a site of 30 acres with a width of six chains and length of about half a mile as replacement for Gantian. This fishing village named Api-Api (see Original names below) was chosen due to its proximity to North Borneo Railway and the natural port that was up to 24 feet deep and protected from the wind. This new administrative centre was renamed Jesselton after Sir Charles Jessel, the then Vice Chairman of the Company.
Eventually, Jesselton became a major trading post of North Borneo, dealing in rubber, rattan, honey, and wax. The new railway was used to transport goods to Jesselton harbour. The Malay and Bajau uprisings during these times were not uncommon, and the Company worked to quell the long-standing threat of piracy in the region.
Jesselton was razed by the retreating British early in World War II to prevent it from falling into the hands of the Japanese. After the Japanese takeover of Borneo, it was again renamed Api. Several rebellions against the Japanese military administration took place in Api. One major rebellion occurred in 10 October 1943 by the group called Kinabalu Guerrillas, consisting of local inhabitants. Japanese forces quelled the rebellion after its leader, Albert Kwok was arrested and executed in 1944. At the later stages of the war, what remained of the town was destroyed again by Allied bombings day
