UNIKOM was established by Security Council resolution 689 (1991) of 9 April 1991, following the forced withdrawal of Iraqi forces from the territory of Kuwait. The Council was acting under Chapter VII of the United Nations Charter. UNIKOM, set up initially as an unarmed observation mission, was to monitor a demilitarized zone (DMZ) along the boundary between Iraq and Kuwait and the Khawr 'Abd Allah waterway, to deter violations of the boundary, and to observe any hostile action mounted from the territory of one State against the other. In February 1993, following a series of incidents on the border, the Security Council decided to increase UNIKOM's strength and to extend its terms of reference to include the capacity to take physical action to prevent violations of the DMZ and of the newly demarcated boundary between Iraq and Kuwait.

By its resolution 689 (1991), the Council also decided that the modalities for the Mission should be reviewed every six months, but without requiring in each case a formal decision for its extension. The Council's formal decision would be required only for UNIKOM's termination, thus ensuring the indefinite duration of the Mission, its termination being subject to the concurrence of all the permanent members of the Council.

By acting under Chapter VII, the Council demonstrated that the international community would act decisively should Iraq attempt to attack Kuwait again. To further underline this, all five permanent members of the Security Council, for the first time in a peacekeeping operation, agreed to provide military observers.

The mandate of UNIKOM was completed on 6 October 2003.