In the early part of the 17th century, a couple by the names of Pablo and Rita made a long journey across the wilderness, bringing with them a handful of rice seedlings and some other useful provisions. Fortune seemed to be with them when they reached the place, the present site of the poblacion of Pagbilao. After a brief stay and learning that the place was a very promising region in the future, they brought their married children from their places of origin and lived together, making the place their permanent settlement. A few years later, the aboriginal inhabitants began to increase in number, including tribes from other distant places.

In 1725, a prominent man of the place by the name of Don Luis Felipe ruled the tiny poblacion. His advice was considered by the inhabitants as law. The people then lived in peace, and no sign of disorder existed. They lived in huts furnished with the necessary provisions. Native products such as bamboo beds (papag) and winnowing baskets (bilao) were common in the area as their major products. Tagalog was the dialect spoken.

One bright day in the early part of 1725, while the natives were busy with their usual trade of business making papag and bilao, a group of Spanish missionaries, mostly Catholic priests, arrived in the village. It was a traditional belief of the natives that foreigners maltreated the natives more often than not by bad means rather than good ones, and fearing that this would happen, the natives tried to elude the strangers.

Realizing that the natives were in panic and afraid, the missionaries had an excellent idea: they raised their right hands wide open, symbolizing that they had come to make friends with the Filipinos. The natives then became calm and settled into their places in a friendly manner. The missionaries tried to talk with the Filipinos using their own language, but were not understood.

One of the missionaries, however, asked a friendly question while accidentally pointing to a bamboo bed: “What is the name of this village?” Assuming that the question was asking for the name of the object he was pointing at, one of the villagers quickly replied, “PAPAG,” and the missionary immediately noted the word papag in his record. Another missionary in the group asked the same question in the same manner while pointing to a winnowing basket: “What place is this?” “BILAO,” one of the natives readily answered, and the word bilao was also noted in the record.

After so many exchanges of unfamiliar languages between the natives and the strangers, no proper understanding resulted. The Spaniards then continued westward, debating what name they should give the location. The question was resolved by giving the place a name derived from the words spoken by the natives. Referring to their records, the phrase papag-bilao was soon realized. Thinking that the word was too long to pronounce, they shortened it by omitting the first two letters from PAPAG—P and A—producing PAG. With the combination of the words PAG and BILAO, the word PAGBILAO finally originated, and since then, the place was called Pagbilao.