Sandakan (Malaysian: [ˈsandaˈkan]) formerly known at various times as Elopura, is the capital of the Sandakan District in Sabah, Malaysia. It is the second largest city in Sabah after Kota Kinabalu. It is located on the Sandakan Peninsula and east coast of the state in the administrative centre of Sandakan Division and was the former capital of British North Borneo. In 2010, the city had an estimated population of 157,330 while the overall municipal area had a total population of 396,290. The population of the municipal area had increased to 439,050 by the 2020 Census.

Before the founding of Sandakan, Sulu Archipelago was the source of dispute between Spain and the Sultanate of Sulu for economic dominance in the region. By 1864, Spain had blockaded the Sultanate possessions in the Sulu Archipelago. The Sultanate of Sulu awarded a German consular service ex-member a piece of land in the Sandakan Bay to seek protection from Germany. In 1878, the Sultanate sold north-eastern Borneo to an Austro-Hungarian consul who later left the territory to a British colonial merchant. The German presence over the area raised concern among the British. As a result, a protocol was signed between the British, German and the Spanish to recognise Spanish sovereignty over the Sulu Archipelago, in return for the Spanish not intervening in British affairs in northern Borneo.

Sandakan began to prosper when the British North Borneo Company (BNBC) started to build a new settlement in 1879, developing it into an active commercial and trading centre as well as making it the main administrative centre for North Borneo. The British also encouraged the migration of the Chinese from British Hong Kong to develop the economy of Sandakan. However, the prosperity halted when the Japanese occupied the area. As the war continued and Allied bombing started in 1944, the town was totally destroyed. Unable to fund the costs of the reconstruction, the administrative powers of North Borneo were handed over to the Crown Colony government. Subsequently, the administrative capital of North Borneo was moved to Jesselton. As part of the 1948–1955 Colonial Office Reconstruction and Development Plan, the crown colony government began to develop the fishing industry in Sandakan.

Sandakan is one of the main ports for oil, tobacco, coffee, sago, and timber exports. Other economic activities include fishing, ship building, eco-tourism, and manufacturing. Among the tourist attractions in Sandakan are Sandakan Heritage Museum, Sandakan Cultural Festival, Sandakan War Memorial, Sepilok Orang Utan Sanctuary, Turtle Islands National Park, and Gomantong Caves.

A first European settlement was built by a Scottish arms smuggler from Glasgow named William Clark Cowie who named the settlement "Sandakan", (which in the Suluk language means "The place that was pawned"). It was soon renamed Kampong German (Kampung Jerman), due to the presence of several German bases there. When another new settlement was built shortly after the previous Cowie settlement had been destroyed by a fire, it was called as Elopura, meaning "beautiful town". The name was given by the British North Borneo Company but the locals persisted to use the old name and later it was changed back to Sandakan. Besides Elopura, it was also nicknamed Little Hong Kong due to a strong presence of ethnic Chinese migration from Hong Kong (mainly Cantonese and Hakka). It was Pryer who gave the settlement the name Elopura meaning "beautiful town". Several years later the settlement was again renamed Sandakan. The name Elopura, however, is still used for some local government functions of the Sabah State Legislative Assembly, including elections. The town is usually referred as "Sandakan" nowadays instead of "Elopura" or "Little Hong Kong". However, efforts have been made to develop Sandakan so that the town is fitting to have the name of "Little Hong Kong" again.

Like most of Borneo, this area was once under the control of the Bruneian Empire in the 15th century before being ceded to the Sultanate of Sulu between the 17th and 18th centuries as a gift for helping the Bruneian forces during the Brunei Civil War. Since the 18th century, Sandakan start to be ruled by the Sultanate of Sulu. In 1855, when Spanish power began to expand in the Philippine archipelago, they began to restrict the trade of foreign nations with Sulu by establishing a port in Zamboanga and issuing a ruling which declared that ships wanting to engage in trade with the Sulu Archipelago must first visit the Spanish port. In 1860, the Sultanate of Sulu became important to the British as their archipelago could allow the British to dominate trade routes from Singapore to Mainland China. But in 1864, William Frederick Schuck, a German ex-member for the German consular service arrived in Sulu and met Sultan Jamal ul-Azam, who encouraged him to remain in Jolo. Schuck associated himself with the Singapore-German trading firm of Schomburg and began working in the interest of the Sultan and Datu Majenji, who was an overlord in the island of Tawi-Tawi. While he continued his voyage to Celebes, he decided to open his first headquarters at Jolo. Large quantities of arms, opium, textiles and tobacco from Singapore were shipped to Tawi-Tawi in exchange for slaves from the Sultanate.

In November 1871, Spanish gunboats bombarded Samal villages in Tawi-Tawi islands and blockaded Jolo. As war in the waters of Sulu began to escalate, the Sultanate came to rely on Singapore's market for assistance. When the Sultanate increased their close trade relations with the British trading ports of Labuan and Singapore, this forced the Spanish to take another major step to conquer the Sulu Archipelago. The arrival of German warship SMS Nymphe at the Sulu Sea in 1872 to investigate the Sulu-Spanish conflict made the Sultanate believe Schuck was connected with the German government, thus the Sultanate granted Schuck an area of land in the Sandakan Bay to establish a trading port to monopolise the rattan trade in the northeast coast where Schuck could operate freely without the Spanish blockade. The intervention of Germans on the Sulu issue caught the British' attention and made them suspicious, especially when the Sultanate had asked for protection from them. Schuck then established warehouses and residences in the Sandakan Bay, along with the arrival of two steamers under the German flag and it served as a base for the running of gunpowder and firearms. When another German warship SMS Hertha visited Sandakan Bay, its commander described the activity in Kampung Jerman:

... during our stay, two small steamers under German flag, ostensibly coming from Labuan, ran in; also third, of about the same size, with a flag of all yellow, the property and flag, as I was told of the Datu Alum. Judging from the stores in the settlement, cotton goods, arms and especially firearms, appears to be the articles of trade with the natives of Sulu.