The eagle was used for heraldic purposes in the late Middle Ages by a number of noble families in Albania (it is said that Skanderbeg used it on his flag) and became the symbol of the Albanians. The Kastrioti's coat of arms, depicting a double-headed eagle on a red field, became famous when he led a revolt against the Ottoman Empire that resulted in brief independence for some regions of Albania from 1443 to 1478. The double-headed eagle on the flag is borrowed from the banner of the Byzantine Empire (specifically the emblem of the Palaiologoi dynasty).

The symbol of the double-headed eagle was re-used by Albanian nationalists during the late 19th and early 20th centuries as a symbol of their campaign for their country's independence from the Ottoman Empire. On 28 November 1912, the Albanian Declaration of Independence was proclaimed in Vlora and the flag, raised by Ismail Qemal, was adopted as the symbol of the new nation.

The Albanian flag has gone through a number of changes over the years as different regimes have modified it. During the reign of King Zog (r. 1928–1939), a crown was added to the flag and was replaced by two fasces during the Italian occupation of Albania. After World War II, the communist regime added a five-pointed golden star, which was removed on 7 April 1992 after the communist government in Albania collapsed.

Albania's maritime flags—the civil ensign and the naval ensign—are both different from the national flag. The civil ensign consists of three horizontal bands of red, black, and red. The naval ensign is similar to the national flag, except that the eagle is on a white field, and the lower portion of the flag has a red stripe. The eagle of the flag of Albania is depicted on the reverse of the Albanian five lekë coin, issued in 1995 and 2000.

Beginning in 1969, the flag of Albania was widely unofficially flown in Kosovo by the country's ethnic Albanian population. It was the symbol of the unrecognized Republic of Kosova during the 1990s. The current independent state of Kosovo uses a different flag that was designed to avoid any symbols associated with a particular ethnic group.