Palacios was founded in 1903, in an area named by shipwrecked Spaniards who supposedly saw a vision of tres palacios (three palaces) as they swam to shore. Fishing is Palacios dominant industry today, both sport and commercial, along with seafood processing plants. The port is home to the largest fishing fleet on the Texas Gulf Coast.
An attractive bayfront park that stretches along Tres Palacios Bay offers palm trees, picnicking facilities, and a spectacular 1.5-mi. railed walkway at water's edge. Other features include a pier with covered pavilion, fishing jetty, and boat ramps.