The term Third World arose during the Cold War to define countries that remained non-aligned with either NATO, or the Communist Bloc. The United States, Canada, Japan, South Korea, Western European nations and their allies represented the First World, while the Soviet Union, China, Cuba, and their allies represented the Second World. This terminology provided a way of broadly categorizing the nations of the Earth into three groups based on political and economic divisions.

The Third World was normally seen to include many countries with colonial pasts in Africa, Latin America, Oceania and Asia. It was also sometimes taken as synonymous with countries in the Non-Aligned Movement. In the dependency theory of thinkers like Raúl Prebisch, Walter Rodney, Theotonio dos Santos, and Andre Gunder Frank, the Third World has also been connected to the world economic division as "periphery" countries in the world system that is dominated by the "core" countries.

Due to the complex history of evolving meanings and contexts, there is no clear or agreed-upon definition of the Third World. Some countries in the Communist Bloc, such as Cuba, were often regarded as "Third World". Because many Third World countries were extremely poor, and non-industrialized, it became a stereotype to refer to poor countries as "third world countries", yet the "Third World" term is also often taken to include newly industrialized countries like Brazil, India and China. Historically, some European countries were non-aligned and a few of these were and are very prosperous, including Ireland, Austria, Sweden, Finland, and Switzerland.

Over the past few decades since the fall of the Soviet Union and the end of the Cold War, the term Third World has been used interchangeably with the least developed countries, the Global South, and developing countries. However, this usage and the concept itself has become outdated in recent years as the term wrongly represents the current political or economic state of the world.