Founded in 1519 by Spanish conquistador Pedro Arias de Avila, Old Panama was the first European settlement of the Pacific coast of the Americas. A rich port and strategic crossroads in the transport of South American gold and silver to Spain, the city was sacked by English privateer Sir Henry Morgan, in 1671.

The ruins of the old settlement are considered a popular tourist landmark. Since the mid-1990's, Old Panama Foundation (Fundación Panama La Vieja) a non-profit organization, has conducted a number of archaeological excavations in the area which have yielded a large number of 16th and 17th -century artifacts and Native American human remains (the Spanish founded Old Panama on the site of a long-established Indian settlement). The findings are currently on display at the new Museum and Visitors' Center, located on Vía Cincuentenario, about half-a-kilometer away from Old Panama's main square. Along with the neighborhood of San Felipe (the "new" city built by the Spanish after Morgan's plundering) Old Panama was declared a World Heritage Site by UNESCO in 1997.

Various international organizations are working along with Fundación Panama Viejo in refurbishing the ruins, some of which have become trendy venues for outdoor classical-music concerts and weddings during Panama's dry season (December-April).