The name Panola is derived from ponolo, the Cherokee word for "cotton."
In 1806, after the United States bought Louisiana from France, a boundary dispute between the United States and Spain was temporarily resolved by the Neutral Groundqv agreement, but after the Mexican War of Independence, another treaty had to be negotiated between Mexico and the United States. In 1840 the boundary between the Republic of Texasqv and the United States (the line that later became the county's eastern boundary) was settled. The Sabine River was established as the boundary south of the thirty-second parallel, but it was necessary to send a commission of representatives from both countries to survey the line north of the parallel. On April 23, 1841, the commission set a granite marker at the location of the thirty-second parallel, 100 feet off present State Highway 31. The western side of the shaft was inscribed with the letters "R. T." (for Republic of Texas); the eastern side was inscribed "U. S." and the southern side, "Merid, Boundary, Established A.D. 1840." The marker, the only one of its kind, still stands on the line between Panola County and DeSoto Parish, Louisiana. In the early 1840s a feud erupted between two factions who called themselves Regulators and Moderators. For almost four years skirmishes extended from Harrison County and the Caddo Lake area through Shelby and San Augustine counties and into Sabine County. The so-called Regulator-Moderator War grew out of the unsettled border conditions; the Neutral Ground furnished a secure residence for lawless men, and their activities caused the growth of vigilante groups. The warfare ended in 1844, when President Sam Houston ordered out the militia to stop it. On March 30, 1846, the Texas legislature established Panola County from parts of Shelby and Harrison counties. Because the legislature specified that the county seat was to be within five miles of the center of the county, it took two years for the county to choose a permanent seat of government. Only two real villages, Pulaski and Grand Bluff, existed in the area in 1846; both were ferry towns on the Sabine River. Both were also more than seven miles from the center of the county. Nevertheless, commissioners appointed to choose the two most desirable locations for the county seat selected Grand Bluff and Pulaski to compete for the county seat in a public vote. Two elections were held in the summer of 1846. County officials were elected on July 18, and a second election on August 23 chose Pulaski, by a small majority, as the county seat. The first court session met there on September 9. After dissatisfied citizens challenged the legality of the choice, Chief Justice Allison ruled that Pulaski would be the temporary county seat until appeals could be examined and an official legal decision made by the state legislature. Since neither village satisfied the legislature's requirements, the entire procedure had to be repeated. Pulaski and an uninhabited townsite later called Carthage near the center of the county were nominated for county seat. In an election held in August 1848 the voters of the county chose Carthage. No part of the present Panola County was included in the 1842 Panola Judicial County -Handbook of Texas Online: Panola County