The club was founded on 11 September 1949 and started and continue to be based in the town of Santa Rosa de Lima in the department of La Union.
The club began playing in the second division and spent almost twenty years there until in 1971 Municipal Limeño got promoted to the top flight at the expense of UCA.
First tenure in the first division (1972–1975)
Municipal Limeño campaign of the 1972 season was exceptional one for a newly promoted team with them coming in sixth place with sixteen points their team was led strongly by the Guatemalan Tomas Gambo, who scored five goals (the team leading goalscorer) and enabled the club to qualify to the semi-final group. However their experience was an unhappy one with the team losing all their games and bowing out of championship contention.
Limeño 1973 and 1974 season were unhappy campaign with the team struggling and finishing in the relegation group, however both time the team managed to survive relegation at the expense of Excelsior and Sonsonate.
But after several near relegation, Municipal Limeño finally were relegated in the 1975 season after only earning 16 points from 33 games. The club were forced to play a promotion-relegation battle against Once Municipal in which the team lost and were relegated to the second division along with Juventud Olímpico.
Second Tenure in the first division (1993–2005)
It would not be until 1993, 18 years after getting relegated, that they would make a return to the first division.
during their second tenure (1993–05) in the first division they reached the semi-finals six times, including reaching the grand final in the Apertura 1999 and Apertura 2000 under the coaching off Óscar Emigdio Benítez however both time the club lost in the grand final against Águila.
They were once again relegated in 2005, after they lost a promotion-relegation match against Coca-Cola of Soyapango.
Third Tenure in the first division (2009–2010)
On 26 June 2009, Chalatenango going through financial troubles, sold their spot in the Salvadoran Primera División to Limeño. This resulted Municipal Limeño's return to the First Division after a four-year absence. However their campaign was an unhappy one with them finishing second last and forcing them to play a promotion/relegation match against Once Municipal which they lost and were relegated to the Second Division and that's where the club has remained ever since.
The club spent the next few seasons trying to regain promotion to the First Division, they made several second division semi-finals and grand finals but always falling short, however the club finally succeeded when they won the Apertura 2015 title defeating Fuerte San Francisco, then winning the Clausura 2016 title defeating Atlético Comalapa of Chalatenango 5–4 in penalties, after tying on aggregate 3–3, the club were promoted back to the Primera Division.
Municipal Limeño have rivalries with several clubs, including local rivalries with Atlético Balboa. A rivalry with Águila was created when Águila and Limeño, faced each other twice in grand finals (Both falling in the way of Águila). When former Limeño player Rudis Corrales moved to Águila, it caused uproar with Águila supporters.
Limeno has supported a long rivalry with Pasaquina for geographical reasons, since both are from the province of La Union; this clash is called the "Derby Unionense."