On 26 August 1975 the colonial administration in Portuguese Timor abruptly removed itself from Dili to the island of Atauru, amidst escalating armed conflict among Timorese political parties. A puzzle that has remained is why did the Portuguese administration leave so precipitately, and why did it not return a few days later when the conflict was over? We have been left with the impression that Portugal simply deserted its responsibilities, abandoning the territory to Indonesian annexation. This paper pieces together a rivetting but little-known story, from contemporary Portuguese, Indonesian, US, Australian, Timorese and eyewitness accounts, about the humiliating capture and detention by Timorese and Indonesians of Portuguese military as prisoners of war, which helps to explain a previously unrecognized constraint on Portuguese policy in East Timor in 1975-1976. This paper also shows that Indonesia had taken some important lessons from history on how to manage Portugal, from India's annexation of Portuguese Goa in 1961.