Palau was initially settled more than 4,000 years ago, probably by migrants from what today is Indonesia. British traders became prominent visitors in the 18th century, followed by expanding Spanish influence in the 19th century. Following its defeat in the Spanish-American War, Spain sold Palau and most of the rest of the Caroline Islands to Germany in 1899. Control passed to Japan in 1914 and then to the United States under United Nations auspices in 1947 as part of the Trust Territory of the Pacific Islands.
Four of the Trust Territory districts formed a single federated Micronesian state in 1979, but this eventually dissolved as the individual districts--long culturally distinct--opted for more locally popular status. Palau approved a new constitution in 1981, subsequently signing a Compact of Free Association with the United States in 1982. After eight referenda and an amendment to the Palauan constitution, the Compact went into effect on October 1, 1994, marking Palau's emergence from trusteeship to independence. - US State Dept
After three decades as part of the UN Trust Territory of the Pacific under US administration, this westernmost cluster of the Caroline Islands opted for independence in 1978 rather than join the Federated States of Micronesia. A Compact of Free Association with the US was approved in 1986 but not ratified until 1993. It entered into force the following year when the islands gained independence. - The World Factbook