Pattaya was simply a small fishing village until it was discovered as a beach resort by Bangkok residents in the 1960s. Soon thereafter, American servicemen from the U.S. Air Force base at U-Tapao in neighbouring Rayong province began using the area for "rest and recreation" (R&R), causing a huge boom in prostitution. When the Americans left following the end of the Vietnam War, the city fell into a crisis. However, modern mass tourism, particularly Sex tourism from Europe and America brought a new lease of life to Pattaya. In recent years the City has pushed hard to clean up its image and family-focussed entertainment is increasingly available, however the core-sex industry has ensured that Pattaya retains its position as one of the World's largest red light districts.

In 2005, more than 35,000 hotel rooms were available in Pattaya. Pattaya has seen a large increase in family tourism in recent years, thanks to efforts to present a more wholesome image. Pattaya is an especially popular vacation destination for families from Russia, Eastern Europe and Scandinavia. Pattaya also has a large international expatriate population and many services meet international standards.

The rapid growth of tourism brought about many negative consequences, such as petty crime and prostitution. These problems seemed beyond the capabilities of the Central Government. In 1976, the Pattaya City Act was passed by the Thai legislature, making Pattaya a self-administrating municipality governed by a Council-manager government. However, many argue that this administration system has drawbacks (for example, the mayor may disagree with the city manager). Critics have recommended abolishing the system.