Palau's Supreme Court was created in 1981, pursuant to Article X of the Constitution. Mamoru Nakamura was the first Chief Justice of the Supreme Court. Educated in Hawaii and Oregon, Justice Nakamura worked in a variety of legal capacities in Micronesia before being appointed the first Micronesian Associate Justice on the High Court of the Trust Territory of the Pacific Islands. He served as Palau's first Chief Justice from 1981 until his death in 1992. In 1992, President Ngiratkel Etpison appointed to the Supreme Court the current Chief Justice, Arthur Ngiraklsong.

      The Court sits in Koror, with certain arguments being heard forty-five minutes away in Palau's capital, Melekeok. The building housing the Court in Koror was built by the Japanese Administration, beginning around 1922. The building served as the Palau District Branch government building, and included tax collection and administration offices. The basement of the building served as a jail, and a formal garden filled an interior yard. The building also housed a local court, presided over by one judge. The South Seas Appellate Court was also located in Koror. The judge of the Koror local court also served as the Chief Justice of the Appellate Court.

      While much of Koror was destroyed in World War II, the Court building survived. In recent years, the Court complex has expanded, with annexes named after Pablo Ringang, presiding judge of the Justice Court and the District Court, and after former Chief Justice Nakamura. The complex now houses the Court of Common Pleas, courtrooms and chambers for all four Supreme Court Justices, and the Singichi Ikesakes Law Library (named for the first Presiding Judge of the Court of Common Pleas), as well as Offices for the Clerk of Courts, Administrative Director, Marshals, Probation Officers, Attorney General and Public Defender.

      In 2006 government officials moved their offices in the former capital of Koror to Ngerulmud, located in the state of Melekeok. The capitol building in Ngerulmud is the location for certain trials and most oral arguments of the Palau Supreme Court Appellate Division as well as all of the activities of the Land Court along with most of the hearings.