Background: The IAEA colony is the only one available for mass rearing of Glossina pallidipes, a vector of human and animal African trypanosomiasis in eastern Africa. This colony is the source for Sterile Insect Technique (SIT) programs in East Africa. The source population of this colony is unclear and its genetic diversity has not previously been evaluated and compared to field populations. Methodology/Principal Findings: We examined the genetic variation within and between the IAEA colony and its potential source populations in north Zimbabwe and the Kenya/Uganda border at 9 microsatellites loci to retrace the demographic history of the IAEA colony. We performed classical population genetics analyses and also combined historical and genetic data in a quantitative analysis using Approximate Bayesian Computation (ABC). There is no evidence of introgression from the north Zimbabwean population into the IAEA colony. Moreover, the ABC analyses revealed that the foundation and establishment of the colony was associated with a genetic bottleneck that has resulted in a loss of 35.7% of alleles and 54% of expected heterozygosity compared to its source population. Also, we show that tsetse control carried out in the 1990's is likely reduced the effective population size of the Kenya/Uganda border population. Conclusions/Significance: All the analyses indicate that the area of origin of the IAEA colony is the Kenya/Uganda border and that a genetic bottleneck was associated with the foundation and establishment of the colony. Genetic diversity associated with traits that are important for SIT may potentially have been lost during this genetic bottleneck which could lead to a suboptimal competitiveness of the colony males in the field. The genetic diversity of the colony is lower than that of field populations and so, studies using colony flies should be interpreted with caution when drawing general conclusions about G. pallidipes biology.