Officially the village was born around the second half of the XIX century, its first house (Lu Palazzedhu) being built in 1875 by Gran Domenico Fresi, also called Zecchino, in the little square bearing its name. Its importance grew at the beginning of the XX century, as it became the main port link to La Madddalena isle, also thanks to its beautiful position on Costa Smeralda. It became an autonomous municipality in 1959 and since the 1970s its fishing and farming economy has been gradually integrated by tourism, when some entrepreneurs realized the potential of this stretch of coast and started building its first facilities.
Among them there was the Spanish count Raphael Neville, creator of the exclusive residential village of Porto Rafael at about 1 km from Palau around which there is a flourishing elite tourism. Today Palau is very popular in summers, thanks to its naturalistic resources, the beaches and the facilities, which allow tourists to have all comforts.
Piazza Fresi makes up the heart of the town and with the houses of the nearby little streets, represents one of the most fascinating corner of the ancient village.
On Friday mornings you can visit the weekly market in Via Fonte Vecchia, which in July and August is lit by the lively stalls of a picturesque night open-air market, stretching on to Via Nazionale. For sun tan lovers the nearest beach is Palau Vecchia left of the ferryboat docks, with beautiful pinewoods on the background. At the entrance of the village, before the railroad crossing and turning left, you can reach La Sciumara beach, opening up over the Rada di Mezzo Schifo. Going on along the same road you reach the charming village of Porto Faro, facing the sea with a beautiful beach set in the green vegetation.