Britain evicted about 2,000 people from the tropical Chagos archipelago, a British colony, in the 1960s and 1970s so the US military could build an air base on Diego Garcia, the largest of the islands.
Chagossians have fought in British courts for years to return to the other islands. In June the Supreme Court rejected their most recent appeal.
The British government announced Wednesday that it will continue to lease Diego Garcia to the U.S. Until 2036. It said it has decided against letting the islanders return "on the grounds of feasibility, defense and security interests, and cost to the British taxpayer."
Conservative lawmaker Andrew Rosindell said Thursday that the decision had caused "shock, anger and dismay" among islanders.
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"These are British subjects, and they are entitled to the same rights and freedoms and self-determination that all British citizens should have," Rosindell told lawmakers in the House of Commons.
The government promised 40 million pounds (USD 50 million) in compensation to the displaced islanders.
The eviction of the islanders from their home halfway between Africa and Southeast Asia has long been controversial for Britain. UK authorities have expressed regret for the treatment of the islanders, but successive governments have blocked their attempts to return.