The settlement was first mentioned in 1339, after the area was raided by the Livonian Order. Two hill-forts have been preserved since this time.
After Christianization of Samogitia, the settlement belonged to the Samogitian bishop, and the first church was built here in 1493. Since 1600 it was known as a town. In 1703 the town was granted the privilege to hold a market-place.
The anarchist Emma Goldman lived in the town for a short time as a child, when her father operated an inn here. In Papilė she became close friends with a servant of a family named Petrushka. While in Papilė, she witnessed a "half-naked human body being lashed with a knout"; this experience terrified her and contributed to her lifelong distaste for violent authority.
Papilė is also the location where Simonas Daukantas, the writer and historian, is buried.
Ahron Dovid Burack, who became a prominent Orthodox rabbi and yeshiva leader in the United States, was born in Papilė in the early 1890s.