Pearl Lagoon, along with the eastern half of present-day Nicaragua, was a British protectorate from 1655 until 1860, a period when the region was called the Mosquito Coast.

At that time, Pearl Lagoon was called "the Granada of the Mosquitia" by one of the conquistadores of the Pacific Coast because of its beauty and the booming ship traffic.

An 18th century cannon situated on the municipality wharf of Pearl Lagoon has an inscription commemorating battles between liberal and conservative factions.

Although those teams no longer exist, baseball is still one of the main sports in the community which is also played in the dry season on Sundays at the Harry and Maggie Taylor municipal stadium.

The road is now reconstructed and as of today, it permits direct access to Managua from Pearl Lagoon[6] and was financed by the World Bank (WB) through the International Development Association (IDA).