The area selected to house the sugar refinery had several key features: In Hawaiian, Pāhala refers to the ashes of leaves from the hala tree (Pandanus tectorius).

Long ago, when cracks were found in the sugarcane fields, workers would stuff them with hala leaves and burn them.

For years, Pahala consisted of a manager's house, several plantation homes, a general store, and the sugar refinery.

For leisure, a town hall or "Club House" was built and used by the plantation and the community to hold meetings and parties.

By the early 1960s, C. Brewer & Co. had decided to phase out all of the camps and move homes and other structures to Pahala.

Considered a weed in their native Australia, macadamia trees flourished into a new niche market for Hawaiʻi.

A gentleman by the name of Bob Shleser had proposed to Doc Buyers (then CEO of C. Brewer) the idea and technology to convert the Pahala Sugar Mill to produce ethanol fuel from sugarcane.

Shleser also proposed that Hawaiʻi County pass a bill that would require 25% of all vehicles on the island to be retrofitted to use ethanol by 1985.

[citation needed] By the late 1970s, with sugar's looming demise, C. Brewer instead decided to expand its macadamia nut operations.

They began to phase out sugarcane fields that encircled Pahala, converting them to grow macadamia trees.

Still, the Pahala Sugar Mill continued to produce record tons per acre, but at a steep price.

In fact, unlike many other places where the larger plantation homes were purchased by outsiders coming to live in Hawaiʻi, the manager homes in Pahala were mostly purchased by local people who have stepped up to the new economy and have such jobs as doctor, bakery manager, fisherman, policeman, painting contractor and other jobs important to the community.

Its 80 miles (130 km) now include 235 acres (95 ha) of oceanfront park, for which the community raised more than $4 million to purchase and set aside forever.

Inland, more than 115,000 acres (470 km2) have been added to Hawaiʻi Volcanoes National Park, which now circles Pahala in the mountains above the village.

The main entrance to Hawaiʻi Volcanoes National Park is 23 miles (37 km) to the northeast of Pahala on Route 11.

According to the United States Census Bureau, the CDP has a total area of 0.85 square miles (2.2 km2), all of it land.

Pahala's main industries include one of the world's largest macadamia nut growing orchards, cattle and horse ranching, small independent Kaʻū Coffee farms, and the Kaʻū Coffee Mill & Visitor Center.

A former sugar plantation town, Pahala is the district hub for education and health services, including a pharmacy, hospital, clinic, preschool and public school as well as a library.

Plantation houses, from small cottages to large homes and the former plantation manager's manor, have been restored around the village, serving local families and visitors to Hawaiʻi Volcanoes National Park and Punaluʻu Black Sand Beach.

Pahala hosts the annual Kaʻū Coffee Festival and Kaʻū Coffee Trail Run, Science Camps of America for teenagers each summer, and many family reunions and weddings, as well as NGO, company, music and dance retreats.