In 1941, Yugoslavia was invaded and split up, with the dinar remaining currency in Nedić's Serbia as Serbian dinar). The kuna was introduced in Croatia and Bosnia and Herzegovina at par with the dinar, whilst the Bulgarian lev, Italian lira and German Reichsmark circulated in those part of Yugoslavia occupied by these countries.

In 1941, the Yugoslav dinar was replaced, at par, by a second Serbian dinar for use in the German occupied Serbia. The dinar was pegged to the German reichsmark at a rate of 250 dinars = 1 Reichsmark. This dinar circulated until 1944, when the Yugoslav dinar was reintroduced by the Yugoslav Partisans, replacing the Serbian dinar at a rate of 1 Yugoslav dinar = 20 Serbian dinars.

In May 1941, the Serbian National Bank introduced notes for 10, 20, 50, 100, 500 and 1000 dinars. The 100 and 1000 dinar notes were overprints, whilst the 10 dinar design was taken from an earlier Yugoslav note. Other notes were introduced in 1942 and 1943 without any new denominations being introduced.

Petar II Petrović-Njegoš (13 November 1813 – 31 October 1851), commonly referred to simply as Njegoš, was a Prince-Bishop (vladika) of Montenegro, poet and philosopher whose works are widely considered some of the most important in Montenegrin and Serbian literature.

Njegoš was born in the village of Njeguši, near Montenegro's then-capital Cetinje. He was educated at several Montenegrin monasteries, and became the country's spiritual and political leader following the death of his uncle Petar I. After eliminating all initial domestic opposition to his rule, he concentrated on uniting Montenegro's tribes and establishing a centralized state. He introduced regular taxation, formed a personal guard and implemented a series of new laws to replace those composed by his predecessor many years earlier. His taxation policies proved extremely unpopular with the Montenegrin tribes, and were the cause of several revolts during his lifetime. Njegoš's reign was also defined by constant political and military struggle with the Ottoman Empire, and his attempts to expand Montenegro's territory while gaining unconditional recognition from the Sublime Porte. He was a proponent of uniting and liberating the Serb people, willing to concede his princely rights in exchange for a union with Serbia and his recognition as the religious leader of all Serbs (akin to a modern-day Patriarch of the Serbian Orthodox Church). Although unification between the two states did not occur during his lifetime, Njegoš laid some of the foundations of Yugoslavism and introduced modern political concepts to Montenegro.

Venerated as a poet and philosopher, Njegoš is well known for his epic poem The Mountain Wreath, which is considered a masterpiece of Serbian and South Slavic literature, and the national epic of Montenegro, Serbia, and Yugoslavia. Njegoš has remained influential in Montenegro and neighbouring countries, and his works have influenced a number of disparate groups, including Serbian, Montenegrin and South Slav nationalists, as well as monarchists and communists.