The community of Pawleys Island is part of Waccamaw Neck, a long, narrow peninsula between the ocean and the river. The earliest known inhabitants of the area were Waccamaw and Winyah Indians. They called the area "Chicora," meaning "the land," and the term is frequently used by locals.

With European colonization, George Pawley was an early settler, giving his name to the community. The breezy island quickly became a refuge from the mosquitoes that were notable during the summer. With African slaves that were brought to the area came malaria, so those of means would move to summer cottages on the island to avoid the mosquito-vectored malaria and other sicknesses.

In 1791, two years after he was elected president, George Washington toured the Grand Strand. He passed right down The King's Highway in the unincorporated portion of Pawleys Island to visit the Alstons, who were wealthy plantation owners just to the south. Rice plantations occupied the Waccamaw River side of the neck.

The Grand Strand began to develop into a major tourist area during the early 20th century, but Pawleys was among the last areas to be heavily developed. Cypress sided cottages on the island gave the community one of its monikers: arrogantly shabby. With the coming of Hurricane Hugo in 1989, some of these cottages were swept away and have since been replaced by more upscale homes, but there is a ban on commercial or industrial industry on the island with the exeption of a high-rise condeminium and a few inns which were grandfathered in. Though some of the oldest, most classic homes have stayed, such as Beachaven (north end of the island), owned by William Brigham Sr., and the Pelican Inn.

Pawleys Island, South Carolina Town HallThe town government was incorporated in 1986 (some sources say 1984 or 1985). The inland areas are developing very rapidly; in general the locals dislike the new development very much. In fact, they recently ran a successful campaign to refuse Lowe's the right to build in Pawleys.

A local legend on the island has grown about The Gray Man Ghost, a friendly ghost who warns of impending hurricanes. Serious hurricanes have struck in 1724, twice in 1752, 1822, 1911, 1954, and 1989.

Although less secluded and more up-scale than it was only a decade ago, Pawleys Island still retains a quaintness and a relaxed pace which makes it a rare island along the U.S. east coast. The water temperature is comfortable from May to October, and there is abundant fishing, crabbing, shrimping, and birdwatching most months of the year.