Trams in Panama began with an electric tramway in Panama City in 1893 and remained in service, with interruptions, until 1941. Passenger rail transport in Panama dates back to the 1850s, when the first transisthmian railroad line across Panama was beginning to be built to supply an alternate route to California in search of gold and wealth. The Panama Railroad was operating between Colón and Panama City by 1855. An attempt to build a battery operated tram network in Colón in 1910 was not successful.

The Panama Canal Railway is a railway line linking the Atlantic Ocean to the Pacific Ocean in Central America. The route stretches 47.6 miles (76.6 km) across the Isthmus of Panama from Colón (Atlantic) to Balboa. Because of the difficult physical conditions of the route and state of technology, the construction was renowned as an international engineering achievement, one that cost US$8 million and the lives of an estimated 5,000 to 10,000 workers. Opened in 1855, the railway preceded the Panama Canal by half a century; the railway was vital in assisting the construction of the canal in the early 1900s. With the opening of the canal, the railroad's route was changed as a result of the creation of Gatun Lake, which flooded part of the original route. Following World War II, the railroad's importance declined and much of it fell into a state of neglect until 1998, when a project to rebuild the railroad to haul intermodal traffic began; the new railroad opened in 2001.