Location of Panama, Oklahoma
This town began as a coal mining community named Red Town because all of the miners' shacks were painted red. The origin of the town name is uncertain. Some historians claim that the name was inspired by the building of the Panama Canal, but the town was already called Panama by 1898. The site for the canal was not selected until 1902, so this claim seems unfounded. In 1896 the Kansas City, Pittsburg and Gulf Railroad (acquired by the Kansas City Southern Railway in 1900) built a north-south line through the region. The Midland Valley Railroad built an east-west line through the region in 1903-1904. The town of Panama moved to the crossing of the two railroads. The Panama post office first opened January 14, 1898, but the order was rescinded for some unknown reason on February 23, 1898. The post office reopened February 21, 1899.
Panama was still supported by coal mining in 1930. The Ozark Coal and Mining Company had established itself there in 1898, however the coal mines began to close in the 1930s. A creosote plant, established in 1937, provided some jobs for the former miners. The Panama Coal Company, which had engaged in strip mining, went bankrupt in 1977.
Panama is located at (35.170591, -94.67009. It is 9 miles (14 km) north of Poteau on Highway 59.
According to the United States Census Bureau, the town has a total area of 1.5 square miles (3.9 km2), of which 0.66% is water.