Known as La Perla del Sur ("the pearl of the south"), the settlement of Ponce was recognized by the Spanish in 1692, and named after Loíza Ponce de León, the great grandson of Juan Ponce de León. It developed over the next four centuries into an important cultural and commercial centre - essentially a southern capital of the island - largely due to its proximity to the sea. By 1831, it was designated a harbour, but trade was permitted only with Spanish ships. However, with the northern capital a good distance away, over the Cordillera Central, it was hard for the governor to keep tabs on the southern city.

Contraband flourished for the better part of the nineteenth century, as did the arts under the auspices of the Serrallés family, the makers of Don Q rum. The family commissioned European architects to construct mansions downtown, and imported European paintings, music and books. The city became known as a haven for liberal ideas, safe from San Juan's allegiance to Spain, and eventually became a breeding ground for the nationalist movement. As a means of throwing off Spanish sovereignty, the city was glad to surrender to American troops when they entered Puerto Rico via Ponce in 1898, bringing the Spanish-American war to an end and ceding Puerto Rico to the US. What they didn't realize, however, was that the Americans would put a stop to illegal trade and herald a precipitous downturn in Ponce's good fortune.

In 1995, after a difficult period in the city's history, US$500 million was invested in the restoration of the historic centre as a means of jump-starting tourism