One of the most densely populated countries in the Middle East, about 89% of the population of Bahrain lives in the two principal cities of Manama and Al Muharraq. Approximately 66% of the indigenous population is originally from the Arabian Peninsula and Iran. Bahrain currently has a sizeable foreign labor force (about 38% of the total population). The government's policies on naturalization remain controversial. In June 2002, the King issued a decree allowing citizens of the Gulf Cooperation Council (GCC) to take up dual Bahraini nationality. Opposition political groups charge that the government is granting citizenship to foreign nationals who have served in the Bahraini armed forces and security services to alter the demographic balance of the country, which is primarily Shi'a. According to passport officials, about 40,000 individuals have been naturalized over the past 50 years (about 10% of the total population).

The indigenous population is 98% Muslim. Although more than two-thirds of the indigenous population is Shi'a Muslim, the ruling family and the majority of government, military, and corporate leaders are Sunni Muslims. The small indigenous Christian and Jewish communities make up the remaining 2% of the population. Roughly half of foreign resident community are non-Muslim, and include Christians, Hindus, Baha'is, Buddhists and Sikhs.

Bahrain has invested its oil revenues in educational system development, and boasts an advanced educational system. The first public schools for girls and boys were opened in the 1920s. Schooling and related costs continue to be entirely paid for by the government. Although not compulsory, primary and secondary attendance rates are high and literacy rates are currently among the highest in the region. Higher education is available for secondary school graduates and can be obtained through the Bahrain University, Arabian Gulf University and specialized Institutes including the College of Health Sciences -- operating under the direction of the Ministry of Health -- which trains physicians, nurses, pharmacists, and paramedics. The government has targeted provision of educational services to the Gulf Cooperation Council as a potential growth area, and is actively working to establish Bahrain as a regional center for higher education.