Panama, who reach the quarter-finals with the victory, had been winless against the United States, while the Americans had never lost in a group game at the 12-nation Gold Cup.
But while the result was against the odds, it was fully deserved.
"Panamanians don't need much of an excuse to celebrate but they will certainly be partying back home tonight," coach Julio Dely Valdes told reporters as Latin music blasted out of his team's locker-room.
"We worked very hard for that win and we made history today".
Panama have never qualified for a World Cup finals nor won a Gold Cup but the nation of 3.4 million, once considered mainly a baseball country, has been emerging as a force within Central American soccer and won the region's UNCAF tournament in 2009.
In the Floridian heat, Panama took the lead in the 19th minute when Gabriel Gomez floated a long ball into the box and Luis Tejada scrambled to put a loose ball home after US keeper Tim Howard parried out an Armando Cooper header.
The Americans responded positively with Clint Dempsey's header forcing a good save from Jaime Penedo before Clarence Goodson flashed a header just wide from a Landon Donovan free-kick.
But the decisive moment came when defender Tim Ream lost his cool in the 36th minute, making an unnecessarily rash challenge on Blas Perez and Gomez converted the penalty to stun the home crowd of 28,000.
The influential Gomez saw a free-kick flash just over the bar after the break and there were signs that the US were losing their cool with some wild challenges and rushed passing.
But the determined efforts of Michael Bradley and Dempsey in particular started to grind down Panama's midfield and a goal seemed inevitable.
It finally came in the 67th minute when Steve Cherundolo won a rather generously awarded free-kick on the right flank.
Donovan curled in the cross which Bradley met with a firm header and Goodson dived in to nod home.
The crowd sensed a comeback was on the cards and the US piled the pressure on but the chances went begging.
Substitute Chris Wondolowski missed a great chance to equalise, blasting over the bar from three yards out, and then Dempsey headed wide.
Bradley burst into the box but fired his shot off target and Landon Donovan made a mess of his chance near the end, albeit from a tight angle.
"On the night we were not good enough, we were not sharp enough in the areas that matter," said a clearly dejected U.S. coach Bob Bradley.
The US must now win against Guadeloupe in Kansas City on Tuesday to be certain to make the last eight while Panama can enjoy their final group game against Canada, knowing they are already in the quarter-finals.
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