Despite its modern design for the time, Pelayo and the rest of the Spanish Asia-Pacific Rescue Squadron never engaged in combat during the Spanish–American War.

Some historians have argued that had the battleship, along with the modern armored cruiser Carlos V, participated directly in the conflict the course of the war would have been altered dramatically and possibly lead to a Spanish victory, thus retaining Spain's status as a colonial power.

She was originally intended to be the first of a new class of battleships, but a crisis with the German Empire in the Caroline Islands in 1890 led to the cancellation of these plans and the diversion of funds to the construction of the Infanta Maria Teresa-class armored cruisers.

The design of Pelayo was based on that of the French battleship Marceau, modified to give her a draft that was 3 feet (0.91 m) shallower so that she could transit the Suez Canal at full load displacement.

Pelayo spent her early years in Spanish waters, showing the flag in various naval reviews and exhibitions, notably in Greece in 1891, at Genoa, Italy, in 1892, and Kiel, Germany, in 1895.

After the war, she resumed her duty of showing the flag, attending naval reviews in Toulon, France, in 1901 and in Lisbon, Portugal, and Vigo Bay, Spain, in 1904.

There was thought of having her operate with Spain's new dreadnoughts España-class battleship when they began to commission during the World War I era, but by then she was too old and slow to be compatible with them.