The Republic of Palau comprises more than 200 Pacific Ocean islands, only eight of which are permanently inhabited. It is believed that the original settlers of Palau arrived from Indonesia as early as 2500 BC. The Palauans are a composite of Polynesian, Malayan, and Melanesian lineage. Kinship traditionally was and remains the major determinant of social status. Traditional customs sustain a value system that distinguishes between people on the basis of social status and sex.
In 1783, English explorer Captain Henry Wilson became the first Westerner to visit Palau, beginning nearly 100 years of British trade primacy. Spain's claim to the Caroline Islands, including Palau, was upheld by Pope Leo XIII in 1885. In 1899, Spain sold the Carolines and the Northern Marianas to Germany.
The German period (1899-1914) saw increased economic activity in the form of coconut planting and phosphate mining. The Germans also had success in battling longstanding epidemics of influenza and dysentery that had reduced the population of Palau from 40,000 to 4,000 over the previous 120 years.
Japanese forces invaded Palau in 1914 in accordance with a secret agreement with the British. Koror became the administrative center for all Japanese possessions in Micronesia, and by 1935 the Japanese civilian population in Palau reached almost 26,000. Japan made Palau a closed military zone in 1938. During World War II, fighting between U.S. and Japanese forces took place on the islands of Peleliu, Angaur, and Koror.
From 1947 until independence in 1994, Palau was part of the Trust Territory of the Pacific Islands administered by the U.S. pursuant to an agreement with the United Nations. The Compact of Free Association between Palau and the United States entered into force on October 1, 1994.