No transactions were available at all between approximately 13:30 and 14:30 EDT, according to company spokesperson Anuj Nayar, and it took until after 18:00 EDT before all the issues were resolved.
Senior vice-president of the firm's technology division Scott Guilfoyle wrote on the company's official blog that a "network hardware failure" caused the problems and offered an apology to consumers.
"We're now working to fully understand how we can prevent such a service interruption from ever happening again," he added.
PayPal, which is owned by eBay, has over 75 million active accounts and operates in 190 markets worldwide.
It is not known what impact the service interruptions had on the e-commerce sector, but Mr Guilfoyle said his company is currently in talks with vendors to determine how their businesses were affected.