Pana was first known as Stone Coal Precinct when it was founded on June 6, 1845. The name was later changed to Pana Township on September 2, 1856. In 1857, the village of Pana was incorporated. It was at the intersection of east-west and north-south railroads, and had supplies of fuel and water for the steam engines of the railroad.
The name "Pana" is derived from the American Indian tribe, the Pawnee. Pawnee became "pani" or "slave" in the French patois or creole that developed in Illinois. This evolved into "Pana", now pronounced, however, [ˈpejnə].
Pana was the site of labor union strife in 1899. Non-unionized Pana, both before and after similar events at nearby Virden, hosted a contingent of state militia called in by Governor John Riley Tanner to keep the peace. The militia withdrew from Pana in March, and on April 10 a skirmish between strikers, guards and strikebreakers left seven killed and at least 15 wounded, many of them bystanders.
Pana came to be known as the City of Roses, coined by local newsmen, the Jordan Brothers. Because of a weather and geographical anomaly, Pana has very few hail storms, making it ideal for the greenhouse industry; along with its ample supply of coal. Many major florists and growers set up shop here. At one time, there were 109 greenhouses in Pana.