Located on a trade route connecting Dubrovnik with the medieval mining towns of central Kosovo, Peja emerged as trade centre already in the middle ages. Its name derives from the Turkish word for silk (ipek). In 1999 Peja's bazaar quarter was burned down by Serb forces. More than two-thirds of buildings in Peja were damaged or destroyed, including many traditional stone kullas and Ottoman-era homes. Memories of the recent war live on in streets named after British Premier Tony Blair, and US Generals William Walker and Wesley Clark.
In an effort to industrialise the town after 1945 the communist leadership established leather, shoe, wood and furniture companies. In 1968, an outlet of the Zastava car plant from Serbia was opened here as the major employer. Today, however, little remains of socialist industrialisation in Peja. Only a large brewery is still active and sells its beer in Kosovo and to the Kosovo diaspora.
The history of Peja (Pec in Serbian) is closely linked to that of the Serbian Orthodox Church. To protect the patriarchate from Bulgarian raiders in the 13th century the seat of the Serbian Orthodox Church was moved from central Serbia to Peja. From 1557 until 1766 Peja was the residence of the patriarch and archbishop of the Serbian Orthodox Church. Protected by high walls, the monastic complex sits beautifully located at the entrance of the Rugova Gorge. It features outstanding examples of paintings from the 13th to the 17th century. According to the Ahtisaari Proposal the Pec Patriarchy is a protected zone to guard Serb Orthodox heritage in Kosovo.