 In 1888, the village was officially founded on land that was previously owned by Moses J. Mitton, John Forrest, and Gilbert F. Steeves.According to local folk history, the village's original by-laws contained a clause inserted by a descendant of Gilbert F. Steeves, Caroline "Carrie" Steeves, which stated that if the village allowed any business to sell alcohol in the village, the Steeves family would reclaim the land they had deeded to the village.Panama was incorporated as a village in 1904.