The Panama Canal Zone was a 1,432 km² territory inside of Panama, consisting of the Panama Canal and an area extending 8.1 km on each side. Its border spanned two of Panama's provinces and was created on November 18, 1903 with the signing of the Hay-Bunau-Varilla Treaty.
From 1903 to 1979 the territory was controlled by the United States of America, which had built and financed the canal's construction. From 1979 to 1999 the canal itself was under joint U.S.-Panamanian control.
During U.S. control of the Canal Zone, the territory, apart from the canal itself, was used mainly for military purposes; however, approximately 3,000 American civilians (called "Zonians") made up the core of permanent residents. U.S. military usage ended when the zone returned to Panamanian control.

 

 

The Canal Zone issued its own postage stamps beginning in 1904. Initially they were the current stamps of Panama or the US, overprinted with "CANAL ZONE" in various ways. The last of these overprints were issued in 1939.
In 1928, the Zone issued a definitive series inscribed "CANAL ZONE POSTAGE" depicting various persons involved in the construction of the canal, as well as a 5 c value showing the Gaillard Cut. A series of 16 stamps in 1939 commemorating the 25th anniversary of the canal's completion showed "before" and "after" views of various points along the canal. Thereafter stamps appeared at an average rate of about two per year, with a commemorative set in some years and no stamps in others. The inscriptions were changed to just "CANAL ZONE" in the 1960s.
The last stamp of the Zone was issued on October 25, 1978, and depicted one of the towing locomotives and a ship in a lock. Thereafter Panama resumed the administration of postal service.