On the night of 11 November 1940, the British incapacitated or destroyed half of the Italian fleet's battleships in a daring aerial assault as they lay at rest at Taranto. Until then, the Italians had left their capital ships in harbour, hoping its mere presence as a fleet in being would deter British shipping through the area, though they would not decline battle if given the opportunity.
Six days later, on the night of 17 November, an Italian force consisting of two battleships (Vittorio Veneto and Giulio Cesare) and a number of supporting units attempted to intercept two British aircraft carriers, HMS Ark Royal and Argus and their cruiser escorts, who were en route to Malta in an attempt to provide planes to reinforce that island's defenses (Operation White). The British were warned of their approach and immediately turned about and returned to Gibraltar, launching their aircraft (two Blackburn Skuas and 12 Hawker Hurricanes) prematurely. One Skua and eight Hurricanes were lost at sea, as they ran out of fuel well before arriving at their destination, with the loss of seven airmen.
The Italians' success in disrupting the reinforcement of Malta cast serious doubt upon British plans to send a further convoy to supply the island (Operation Collar). However, the convoy was attempted, with increased support, including ships from Gibraltar-based Force H and Force D out of Alexandria. The convoy was spotted by the Italian intelligence service, and once again the Italian fleet sailed out to intercept it. The first Italian naval unit to make visual contact with the convoy was the torpedo boat Sirio, on the night of 26 November. After launching two torpedoes from long range, which missed their target, Sirio reported seven enemy warships heading to the east.
The British, aware of the Italian fleet's movements, sent their forces north to intercept them before they could come anywhere near the cargo ships. At 09:45 on 27 November, an IMAM Ro.43 reconnaissance floatplane from the heavy cruiser Bolzano discovered a British squadron steaming to the east, 17 nmi (31 km; 20 mi) north of Chetaïbi.
Shortly after, at 9:56, Somerville received the report of his own aircraft from the carrier HMS Ark Royal about the presence of five cruisers and five destroyers, and assumed that these were Italian units closing for battle. Force D had not yet arrived from Alexandria and the British were outgunned, but 15 minutes later, Force D was spotted and the tables turned. The two forces were fairly even; although the Italian ships possessed both longer-ranged and larger guns, the British had an aircraft carrier, which had shown several advantages over the battleship at Taranto. However, the Italian admiral Inigo Campioni had been given orders to avoid combat unless it was heavily in his favour, so a decisive battle was out of the question.