Punalur is a Municipal town on a mountain path that had good relations with Tamil Nadu to the East from time unknown. Most parts of Punalur taluk were inhabited before the Indus Valley Civilization. Human civilizations existed in Punalur during the Mesolithic period, mainly around Thenmalai (known as Shenduruny). Punalur is described in inscriptions of Mithranandpuram and Vellayani. Until 1734, Punalur was under the direct rule of the Ilaydathu Swaroopam. Later it was annexed by Marthanda Varma and came under the rule of Travancore. The British Raj established a good hold over this part of India due to its rich agricultural resources.

Historically, Shenduruny has a rich heritage. A recent study conducted by Dr. P. Rajendran, archaeological research associate of the Poona Deccan College, has resulted in the excavation of the remains of Stone Age culture from a large cave situated at the north western part of the Shenduruny (Kallada) River. It was proved that these remains belong to the Mesolithic period. This study brought out the fact that the Shenduruny River Valley Civilization was one of the oldest river valley civilizations in India. It dates to between 5210 and 4420 BC, making it older than the Indus Valley Civilization which is believed to have flourished from 4400 to 3700 BC. Cave paintings seen here are comparable to the Mesolithic paintings found in the caves of central India. The cave found here is large enough to hold at least twenty people at a time. According to Dr. Rajendran, the marshy place seen below just in front of the cave once must have been a lake. Now the Shenduruny River has the reputation that it had nourished a civilization in the prehistoric past.

Punalur also served as a pivot point in the rise of the independence movement and against the rule of Diwan. Many meetings were centered on Punalur due to its close proximity to Tamil Nadu. Many important decisions on planning and attacking Tirunelveli collector were taken in Punalur.

The Taluk headquarters was shifted from Pathanapuram to Punalur, after an attack at Pathanapuram in 1880. This helped aid the growth of Punalur. Later the flow of goods to and from Tamil Nadu started traveling through Punalur. Punalur is the first settlement after the Western ghats.One of the oldest churches in Kerala,was established by LMS Missionaries in Punalur during 1885.The CSI Church Punalur bulit by the British was used by the English men working in paper mill. The church was also used as a school during the week days as a part of providing education to the natives. It was the first school of Punalur during the rule of British. The opening of the Punalur Suspension Bridge increased the importance of Punalur as a center of trade between Tamil Nadu and Kerala. Later the rail route between Kollam and Thiruchendur made the town more prosperous.

Punalur Paper Mills, the first of its kind in Kerala, served both as an economic center as well as a source of jobs. The Punalur paper mill employees' union was one of the first organised employee unions in the state of Kerala itself. The workers of Punalur paper mill actively participated in movements including the freedom fight and the riot against Diwan rule. Later the Travancore plywood industry added to Punalur's importance in the industrial field. Punalur Market (formerly Sri Ramapuram market) is one of the largest vegetable/agro-products markets in Kerala.

The cultural history of Punalur reflects in the work of traditional and modern artists and performing groups of music, drama, cinema, etc., especially acclaimed contributions of Punalur N. Rajagopalan Nair, Punalur Balan and Lalithambika Antharjanam in theatre and Malayalam literature.

Punalur Municipality was formed on 1 April 1971, with an area of 34.06 square kilometers. Currently, Punalur is a Grade-II municipality and divided into 35 electoral wards. Punalur is the largest municipality in Kollam District.

Punalur is one of the two Revenue Divisions (RDO) of Kollam district and another being Kollam itself. Punalur Revenue divisional office was formed on Keralapiravi day 1 November 2018. It's headed by RDO/Sub Collector. Punalur RDO headquarters is situated at PWD complex, TB Jn. Punalur Revenue division is administratively divided into three Taluks: Punalur, Kottarakkara, and Pathanapuram, each of which is subdivided into 50 villages. Punalur is the headquarters of the Punalur Taluk and is one of the major and largest Taluks in Kollam District. This Taluk comprises 15 villages.

Punalur is the Sub-divisional headquarters of the Kollam Rural Police. It's headed by Deputy Superintendent of Police/Assistant Superintendent of Police. Punalur Police Station is a major police station in Kollam rural district and located at Chemmanthoor Jn., Police Control Room & Highway Police base Station are also functioning in Punalur. Punalur Railway Police Station is the one & only Railway Police Station in Kollam Rural District. A proposal for the Traffic Police Station at Punalur, waiting for Govt. approval.

Court complex functioning in Chemmanthoor, Punalur, presently there is seven courts functioning those are, M.A.C.T, District Fast Track Special Court (Pocso Cases), Family Court, Sub Court, Munsif Court, JFMC-1, JFMC- 2(Forest offences), and a Sub-divisional Magistrate Court.

Punalur has a Divisional Forest Office, it's headed by DFO. Timber Sales Divisional Forest Office (DFO-Timber Sales) and Forest Flying Squad Office also functions at Punalur.

Other important Government offices functioning in Punalur includes Sub-Regional Transport Office, Excise Circle and Range Offices, Fire & Rescue Office, District Educational Office, District Tribal Office, KSEB divisional Office, Telecom divisional Office, KWA Sub-divisional office, NH Sub-divisional Office, PWD Sub-division Office, Sub-Treasury, Sub-Registrar Office, Employment Exchange, LIC Regional Office, Rubber Board Regional Office, Taluk Supply Office, Taluk Statistical Office, Legal Metrology Office, SC/ST Addl. Commissioner Office, Labor Office, Devaswam Board Assistant Commissioner Office, Food Safety Circle Office etc. Most of the Government Offices are functioned in Civil station at Kachery Road, Punalur.