Panguipulli's first recorded inhabitants were indigenous Mapuches that lived along the shores of the main lakes and rivers of the region. The first mention of Panguipulli was in 1776. Guillermo Angermaier, who settled in the western shores of Panguipulli Lake in 1885, was the first non-indigenous person to settle in what is now the comune of Panguipulli.
It was not until 1946 that the city was officially founded. In 1903 the Capuchin order established a mission in Panguipulli. The Capuchin monks built the first schools in the area. In 1947 the Capuchin built Panguipulli's twin towered wooden church, which is now a local landmark
