Now, the club from the Uruguayan capital of Montevideo operates at a more modest level, despite still enjoying domestic domination.
On the continental stage, Penarol have failed to even get out of the Copa Libertadores group phase since they were beaten finalists in 2011 -- the only time a Uruguayan side has reached the trophy match since Nacional were champions in 1988.
But now, thanks to a high-profile fan, the club has been thrust back into the international limelight.
And more so as France striker Antoine Griezmann, the "Coalmen's" most prominent supporter, will line-up opposite Uruguay in the World Cup quarter-finals on Friday.
Griezmann is a Uruguay-phile who has adopted a range of typical traits from the South American country ever since becoming spellbound by team-mates at his formative club in Spain, Real Sociedad.
There he was coached by Uruguayan Martin Lasarte, who alongside team-mate Carlos Bueno transmitted the love for their homeland to the young and impressionable Griezmann.
"It was with him (Bueno) that I first started watching Penarol matches," Griezmann said at a recent World Cup press conference.
"It's a nationality I love, people that I love -- I have a bit of their style: I never give up, I give everything."
Now, the French star drinks the Uruguayan equivalent to British tea -- mate -- loves to eat grilled meat and spread dulce de leche on his tartines, just like Uruguayans.
He's an official Penarol supporter and has even posted an online video of himself singing one of the club's chants.
Despite German and Portuguese origins, he describes himself as "half-Uruguayan," and even speaks Spanish with a Uruguayan accent.
Although currently plying his trade with Spanish side Atletico Madrid, Penarol president Jorge Barrera believes the fresh-faced 27-year-old will one day grace the black and yellow jersey of the club.
He told AFP the club's doors "are open when he wants to play for us and I'm sure one day he'll wear the shirt of Penarol, even if it's just for a friendly".
Given Griezmann's stature in football -- he has been linked with moves to some of Europe's biggest clubs, Barcelona and Manchester United -- is such that he would fit in well at a club with such a rich history.
Penarol were kings of the world between 1960 and 1966. They won the Copa Libertadores -- the South American equivalent of the Champions League -- three times, the Intercontinental Cup -- played between the champions of Europe and South America -- twice, beating Benfica and Real Madrid, while also claiming their domestic crown five times.
Such was their former glories that Penarol were designated by the International Federation of Football History and Statistics (IFFHS) as the "best South American team of the 20th century".
Five times Copa Libertadores winners in total -- twice more than their bitter Montevideo rivals, Nacional -- their record has been bettered only by Argentine giants Independiente and Boca Juniors.
In their homeland, Penarol are known for the very traits Griezmann is hoping to emulate: that never-say-die attitude.
"Penarol won two of their Copa Libertadores triumphs with a last-minute goal," said journalist and writer Cesar Bianchi, author of a book called: "To Penarol. Passion that never dies".
It's not just a characteristic of Penarol but one the whole country shares, according to French specialist in Uruguayan football, Jerome Lecigne.
"What's impressive (in Uruguay) is that from the youngest age, Uruguayans talk football," he told AFP.
"From a youngster to an old lady of 65, they can reel off the team's line-up or give you the score from the last clasico."
While Griezmann's passion for Penarol is unquestionable, how the clubs' supporters will feel about him after Friday's clash remains to be seen.