Southern Central America is a Late Mesozoic/Cenozoic island arc that evolved in response to the subduction of the Farallón Plate beneath the Caribbean Plate in the Late Cretaceous and, from the Oligocene, the Cocos and Nazca Plates. Southern Central America is one of the best studied convergent margins in the world. The aim of this paper is to review the sedimentary and structural evolution of arc‐related sedimentary basins in southern Central America, and to show how the arc developed from a pre‐extensional intra‐oceanic island arc into a doubly‐vergent, subduction orogen. The Cenozoic sedimentary history of southern Central America is placed into the plate tectonic context of existing Caribbean Plate models. From regional basin analysis, the evolution of the southern Central American island arc is subdivided into three phases: (i) non‐extensional stage during the Campanian; (ii) extensional phase during the Maastrichtian‐Oligocene with rapid basin subsidence and deposition of arc‐related, clastic sediments; and (iii) doubly‐vergent, compressional arc phase along the 280 km long southern Costa Rican arc segment related to either oblique subduction of the Nazca plate, west‐to‐east passage of the Nazca–Cocos–Caribbean triple junction, or the subduction of rough oceanic crust of the Cocos Plate. The Pleistocene subduction of the Cocos Ridge contributed to the contraction but was not the primary driver. The architecture of the arc‐related sedimentary basin‐fills has been controlled by four factors: (i) subsidence caused by tectonic mechanisms, linked to the angle and morphology of the incoming plate, as shown by the fact that subduction of aseismic ridges and slab segments with rough crust were important drivers for subduction erosion, controlling the shape of forearc and trench‐slope basins, the lifespan of sedimentary basins, and the subsidence and uplift patterns; (ii) subsidence caused by slab rollback and resulting trench retreat; (iii) eustatic sea‐level changes; and (iv) sediment dispersal systems.