The Wales–England border is one mile to the north, and the Offa's Dyke Path and Marches Way pass through the village.
The fulling-mill at Pandy served the Llanover estate in the 17th century producing wool, which was turned into Welsh flannel.
The village was on a route used by the early railways; the Abergavenny to Hereford line still passes to the west.
The village was redeveloped in the Victorian era by a pioneering lady architect, Bernadette Rocher, who, in the 1870s, extended and reworked many of the older properties in local red sandstone.
Pandy railway station closed in 1958, with trains running through between Hereford and Abergavenny on the Welsh Marches Line.