The first division of the Republic in six departments happened on 27 January 1816.[dubious – discuss] Two more departments were formed later that year. At that time, Paysandú Department included all the territory north of the Río Negro, which included the actual departments of Artigas, Rivera, Tacuarembó, Salto, Paysandú, and Río Negro. On 17 June 1837, a new division of Uruguay was made and this territory was divided into three parts. In the new division, Paysandú Department included also the actual department of Río Negro, until it was split from it in 1868.
The fertile soils of Paysandú have encouraged much agricultural development. Livestock raising is one of the principal agricultural activities, with cattle being raised for both the dairy and beef industries alongside sheep for wool production. Market-gardening is also prominent with the cultivation of oranges and blueberries, whilst wheat, barley, sunflowers and soya beans are also produced. There is also a small fishing industry on the Uruguay River.
Tourism too, is important for the area. Ecotourism is gaining prominence especially in the Esteros de Farrapos National Park further down the river. In addition many farms provide accommodation and facilities for tourists visiting the area.
Paysandú is home to a large brewery and hosts an annual Semana de la Cerveza (Week of the Beer), a weeklong festival of music, arts, carnival type rides, and beer.