Panevėžys was first mentioned in 1503, in documents signed by the Grand Duke of Lithuania Alexander I, who granted the town building rights to construct a church and other structures. Alexander II, is considered the founder of the city, which celebrated its 500th anniversary in 2003. The city lies on the old plain of the Nevėžis River. The city name means "along the Nevėžis." Throughout the 16th century, the city maintained a status of a Royal town. Communities of Poles, and Karaites, settled in the area as early as the 14th century. A Karaite Kenesa, and a Polish Gymnasium, existed in Panevėžys until the Second World War (the Polish version of the name of the city was Poniewież). In the 17th century, the part of the city on the left bank of the river started to develop and expand further. The town played an important role in both the November Uprising, and the January Uprising, and the fights for independence continued there in 1864. After the Industrial Revolution, at the end of the 19th century, the first factories were established in the city, and industry began to make use of modern machinery. As products were oriented towards the mass market, banking intensified and commerce increased. The educational system became more accessible, and literacy increased, as well. By the end of 19th century - the beginning of the 20th century, Panevėžys became a strong economic and cultural center of the region. At the time it was the fourth most important city in Lithuania. It was also a center of operations by local knygnešys. One of them - Juozas Masiulis in 1905 opened first Lithuanian bookstore and printing house. The building is still a landmark of Panevėžys, and local people are proud of a bookstore that is functional for more than 100 years.
Between the World Wars, in the newly independent Lithuania, Panevėžys continued to grow. According to the first census the government carried out in 1923, there were 19,147 people in Panevėžys, among them 6,845 Jews (36%) (in Yiddish the town's name was פוניבז, transliterated as Ponevezh).
The Ponevezh yeshiva was one of the most notable Haredi yeshivas in the history of the Jews in Lithuania that was established and flourished in the town. Rabbi Yosef Shlomo Kahaneman (1886-1969), was its rosh yeshiva (head) and president, who became known as the "Ponovezher Rov" was the head of the yeshiva and was also the leading rabbi of Panevėžys. He managed to escape to the British Mandate of Palestine where he set about rebuilding the Ponevezh yeshiva in Bnei Brak where it is to be found in modern day Israel by the same name of "Ponevezh yeshiva" with a very large student body of young Talmudis scholars. The town's population rose to 26,000 between 1923 and 1939. On June 15, 1940, Russian military forces took over the city, as a consequence of the forced incorporation of Lithuania, into the Soviet Union. A number of political prisoners were murdered near the sugar factory. A great number of the residents were exiled to Siberia or suffered other forms of persecution.
After Germany attacked the USSR, Panevėžys was occupied by German forces, as it had been in the First World War. It acquired the status of a district center ("Gebietskommissariate") within the Reichskommissariat Ostland. During the Nazi occupation nearly all the Jewish population of the town was killed in 1943 during the Holocaust; only a few managed to escape and find asylum abroad.
After World War II, the natural process of the city's evolution was disrupted. The Soviet Communist Party, exercised dictatorial control, and the city was transformed into a major industrial center. During the 1960s and 1980s, several large-scale industrial companies were established. Soviet authority also destroyed old town and only after massive discontent of local people total destruction of old city center was stopped.
The number of inhabitants increased from 41,000 to 101,500 between 1959 and 1979. In 1990, the population reached 130,000. In 1990, after Lithuania regained its independence. The city’s industry faced some major challenges. For some time it was regarded as a place, where plastics cooperatives were making a big bucks. There is still left a suburb region, called by the locals Plastic Kings Castles with very big and sometimes bizarre houses.
For the last 10 years Panevėžys has been organizing International Ceramics Symposia. The unique collection of ceramics is the biggest in the Baltic countries and is renewed each year. The Chamber orchestra, Women's Choir "Golden Oriole" ("Volungė"), ensemble "Muzika" (music) are well-known for various music projects not only in Lithuania but also abroad. The Brass Orchestra "Panevėžio Garsas" (English: Panevėžys Sound) plays not only for Lithuanian audience but also for people in the Baltic countries, Germany, France and the Netherlands. The Orchestra won the Grand Prize in a festival in France in 1997.
The city is a home to many theatres. Juozas Miltinis Drama Theatre is famous in Lithuania and Europe. Juozas Miltinis has brought up a number of actors. One of them is Donatas Banionis who is known internationally. Theatre "Menas" (English: art) was established in 1991. The city boasts of Puppet Wagon Theatre which is the only in Europe. Antanas Markuckis, the director of the Theatre was awarded International Prize of Hans Christian Andersen in Copenhagen in 2003. Every two years the theater organizes the International Theatre Festival "Lagaminas" (English: suitcase). There also is a musical theater and school called Juozas Miltinis school where are drama lessons lectured.