During the time when The Tempest was written and first performed, both Shakespeare and his audiences would have been very interested in the efforts of English and other European settlers to colonize distant lands around the globe. The Tempest explores the complex and problematic relationship between the European colonizer and the native colonized peoples through the relationship between Prospero and Caliban. Prospero views Caliban as a lesser being than himself. As such, Prospero believes that Caliban should be grateful to him for educating Caliban and lifting him out of "savagery." It simply does not occur to Prospero that he has stolen rulership of the island from Caliban, because Prospero can't imagine Caliban as being fit to rule anything. In contrast, Caliban soon realizes that Prospero views him as a second-class citizen fit only to serve and that by giving up his rulership of the island in return for his education, he has allowed himself to be robbed. As a result, Caliban turns bitter and violent, which only reinforces Prospero's view of him as a "savage." Shakespeare uses Prospero and Caliban's relationship to show how the misunderstandings between the colonizer and the colonized lead to hatred and conflict, with each side thinking that the other is at fault.

In addition to the relationship between the colonizer and colonized, The Tempest also explores the fears and opportunities that colonization creates. Exposure to new and different peoples leads to racism and intolerance, as seen when Sebastian criticizes Alonso for allowing his daughter to marry an African. Exploration and colonization led directly to slavery and the conquering of native peoples. For instance, Stephano and Trinculo both consider capturing Caliban to sell as a curiosity back at home, while Stephano eventually begins to see himself as a potential king of the island. At the same time, the expanded territories established by colonization created new places in which to experiment with alternative societies. Shakespeare conveys this idea in Gonzalo's musings about the perfect civilization he would establish if he could acquire a territory of his own.