Prior to development, the land that became Palm Beach Gardens was primarily cattle ranches and pine forests, as well as swampland further west. In 1959, wealthy landowner and insurance magnate John D. MacArthur announced plans to develop 4,000 acres (16 km ) and build homes for 55,000 people. He chose the name Palm Beach Gardens after his initial choice, Palm Beach City, was denied by the Florida Legislature, because of the similarity of the name to the nearby Palm Beach. MacArthur planned to build a “garden city” so he altered the name slightly. The city was incorporated as a “paper town” (meaning that it existed only on paper) in 1959. The 1960 Census recorded that the city officially had a population of one, apparently a squatter whom MacArthur had allowed to stay on his property.

Rapid development took place in the 1960s. By 1970 the city had a population approaching 7,000 people. To showcase his new community, MacArthur purchased an 80-year-old banyan tree located in nearby Lake Park, that was to be cut down to enlarge a dentist’s office. It cost $30,000 and 1008 hours of manpower to move it. A second banyan was moved the following year. While moving the first banyan tree over the Florida East Coast Railway, the massive tree shifted and disconnected the Western Union telephone and telegraph lines running adjacent to the railroad, cutting off most communications between Miami, 80 miles to the south, and the outside world until the damage could be repaired. These trees still remain at the center of MacArthur Boulevard near Northlake Boulevard and are still featured on the city shield. In January 2007, the great-grandson of impressionist artist Pierre-Auguste Renoir, Alexandre Renoir, presented a painting to the city which depicts the Gardens banyan tree. It is currently on display at the city hall on North Military Trail.

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