The history of colonies under the rule of the Japanese Empire in the first half of the 20th century has not been explored well enough so far. For example, the history of Karafuto Governorate (1905-1945), which existed in southern Sakhalin, is covered very little, while some aspects of its history are not known at all. This article focuses on the history of Karafuto Governorate’s formation and its socio-economic structure, namely territorial development after the Russo-Japanese war, its role and status in the colonial system of Japan, the use of the island’s main economic resources and the creation of socio-cultural space, as well as along the memorialization of the colonial past of the Japanese Empire’s northern borders. In addition, this article describes the process of the governorate’s liquidation (it started after the accession of southern Sakhalin to the USSR after the Second World War) followed by passing the governance to the Soviet administration, co-residence of Soviet and Japanese people on the same territory in 1945-1948, the deportation of Japanese people and the fate of the Korean population of the island. The article gives examples of how the memory of the Japanese presence on Sakhalin Island is preserved in Japan and Russia today.