The region between Mexico and Colombia supported a large pre-Columbian population, the most important of whom were the Maya. The Maya civilization originated in the highlands of Guatemala before the 1st millennium BC and reached its greatest flowering between AD 300 and 900 in autonomous city-states in what are now northern Guatemala, Honduras, Belize, and Mexico's Yucatán Peninsula. Maya unity was cultural rather than political, but the civilization's influence was widespread. Maya artistic and scientific achievements surpassed those of contemporary Europeans. After 900, however, the Maya civilization declined, and the people were conquered by Toltec invaders from Mexico.

Christopher Columbus established Spain's claim to Central America in 1502, when he sailed along its coast from the Gulf of Honduras to Panama. His reports of great wealth beyond the mountains that ran the length of the heavily populated isthmus stimulated Spanish conquest, which was launched from Hispaniola under Columbus's son, Diego. The charismatic Vasco Núñez de Balboa founded Spain's first truly productive colony in America at Darién in 1510, and went on to reach the Pacific Ocean in 1513. His successor, Pedrarias Dávila, who ordered Balboa's death in 1517, extended the colony considerably, founding Panama City in 1519, from which he initiated the subjugation of Nicaragua and Honduras. The subsequent conquest of Central America became a bloody struggle among Spaniards representing interests in Panama, Hispaniola, and Mexico. Eventually, Pedro de Alvarado, the loyal lieutenant of the conqueror of Mexico, Hernán Cortés, consolidated control over most of the isthmus. The conquerors killed vast numbers of Native Americans, but even more died from devastating epidemics of smallpox, plague, dysentery, and influenza, introduced by the Europeans. The Spanish enslaved or reduced to serfdom those who remained, establishing an agricultural society based on institutions they had brought from Spain. Native American customs and traditions survived, however, because most of the relatively few Spaniards remained in the towns and cities.

The Creole elite in the captaincy general of Guatemala followed Mexico's lead and severed its allegiance to Spain in 1821. The area then became part of the Mexican Empire of Agustín de Iturbide, but when Iturbide's conservative government fell in 1823, liberals seized control, declared independence from Mexico, and formed the United Provinces of Central America. Chiapas, however, remained with Mexico, and Panama joined Gran Colombia, headed by Simón Bolívar.

The United Provinces embarked on an ambitious but unrealistic program of republican reform and economic development, rejecting the Spanish heritage. Intense regionalism, political intrigue among the elite, and civil war resulted. In 1834 the liberals moved the capital from Guatemala to San Salvador, but their policies still faced bitter opposition and rebellion from conservative members of the elite and the rural masses. After the Guatemalan peasant leader Rafael Carrera captured Guatemala City in 1838, the federation began to disintegrate; the federal president, Francisco Morazán, finally resigned in 1840. Guatemala, Honduras, El Salvador, Nicaragua, and Costa Rica emerged as independent, conservative republics.

England, by this time, had replaced Spain as the dominant external force in the region. The British settlement at Belize had grown from a buccaneering and logging camp in the 17th century to become the principal port of Central America's foreign trade. British influence extended along the Caribbean coast as far as Panama, and in 1862, Belize officially became a British colony (British Honduras). United States interest, however, rivaled British interest after 1849, for the isthmus offered the quickest routes to the gold mines of California. The Clayton-Bulwer Treaty of 1850 resolved some areas of this Anglo-American conflict, but in 1855 William Walker, a U.S. soldier of fortune, invaded Nicaragua with an army of followers. A united Central American conservative army drove him out with British assistance in 1857. Meanwhile, the completion of the Panama Railroad in 1855 caused Central American commerce to shift away from Belize to the more accessible Pacific coast ports, and British influence receded thereafter.

The second half of the 20th century has seen persistent poverty, political instability and social injustice in many of the Central American republics still undergoing modernization. Following the Sandinista overthrow of the Somoza dynasty in Nicaragua in 1978 and 1979, the United States became involved in a major effort to support the counter-revolutionary ("contra") forces against the Marxist government, leading to many deaths and great suffering on both sides (see Iran-Contra Affair). Guatemala has also witnessed prolonged fighting between alleged left-wing groups and a repressive military. Thousands of deaths and hundreds of thousands of migrants have resulted from this conflict. Panama's political repression and corruption forced the United States to intervene in 1992 to remove President Manuel Noriega, who was allegedly connected to Colombian drug cartels.