Portugal has two time zones and observes daylight saving time. Continental Portugal and Madeira use UTC+00:00, while the Azores use UTC–01:00. Daylight saving time (locally known as Hora de Verão, meaning "summer time") is observed nationwide from the last Sunday in March to the last Sunday in October, when continental Portugal and Madeira advance one hour to UTC+01:00, and the Azores advances one hour to UTC+00:00.

In the early 19th century, Portugal adopted mean solar time. Navy (located in Lisbon) and Coimbra Astronomical Observatories calculated solar time to be used as legal time in their longitude regions. In 1861, the Astronomical Observatory of Lisbon was founded and, in 1878, it was tasked with the exclusive competence of calculate its mean solar time and to transmit it to rest of the country's public services. Thus, in practice, Portuguese standard time was defined as the mean solar time at Lisbon Observatory longitude, which was later calculated as being GMT–00:36:45.

In 1911, it was agreed that standard time in Portugal should be defined in accordance with the 1884 prime meridian system. By the Decree of 26 May 1911, a reform was approved regarding standard time in Portugal and in its overseas Empire: although most of continental Portugal is located west of the 7º 30'W meridian (i.e. in the theoretical zone of UTC-01:00 time zone), mainland Portugal adopted UTC+00:00 as its time zone. By the same law, UTC-02:00 time zone was adopted for the Azores and Cape Verde, UTC-01:00 for Madeira and Portuguese Guinea, UTC+00:00 for São Tomé and Príncipe and São João Baptista de Ajudá, UTC+01:00 for Angola, UTC+02:00 for Mozambique, UTC+05:00 for Portuguese India and UTC+08:00 for Macau and Portuguese Timor. These time zones were adopted on 1 January 1912.

Daylight saving time (Hora de Verão, or "summer time", in Portuguese) was observed for the first time in 1916, during World War I, and it consisted in advancing clocks by one hour. In that year, DST was observed from 17 June to 1 November but in following years until 1921, it was observed from 1 June to 14 October.

DST continued to be observed every year in 1920s and 1930s, although some small interruptions had occurred (1922–1923, 1925, 1930 and 1933), as well as the start and end date of DST, which often varied.

Between 1942 and 1945, during World War II, Portugal not only advanced clocks by one hour during DST, as also advanced them by another hour during some months of those years, coming to have clocks two hours ahead of GMT, effectively observing "double DST". Portugal returned to GMT following the end of the war in 1945, and one hour of DST continued to be observed. In 1948, it was approved that DST should be observed from the first Sunday in April to the first Sunday in October.

From 1966, DST was observed year-round, so that, in practice, Portugal changed its time zone from WET (UTC+00:00) to CET (UTC+01:00). However, due to the later sunrises and sunsets, many complaints accumulated: on winter mornings, people went to work under a completely dark sky, and at 09:00, when school classes started, the sun was still rising, which eventually had repercussions on students' school performance and their safety during morning trips from home to school. Furthermore, in the 1970s, the idea of reintroducing DST as an energy saving measure gained strength in Europe as well as in Portugal. However, although there were so many complaints in the country with the use of UTC+01:00 year round, it became clear to policymakers that if DST was to be re-introduced, it could never be observed as CEST (UTC+02:00), and the only solution was to re-adopt WET as standard time. Therefore, Portugal re-adopted Western European Time (UTC+00:00) as its standard time in 1976. DST started to be observed every year as WEST (UTC+01:00), usually from early April to later September. From 1981 on, DST started to be observed from the last Sunday in March to the last Sunday in September.

In 1986, time in Portugal began to be calculated in accordance with UTC rather than GMT.