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It has a total area of {{Convert|466|km2|sqmi|sp=us}}, making it the fourth [[List of countries and dependencies by area|smallest country in the world]].<ref>{{Cite web|title=2015 Statistical Yearbook|url=https://www.palaugov.pw/wp-content/uploads/2016/09/2015-Statistical-Yearbook-1.pdf|date=1 February 2016|access-date=21 August 2018|language=en-US|archive-date=11 March 2023|archive-url=https://web.archive.org/web/20230311194531/https://www.palaugov.pw/executive-branch/ministries/finance/budgetandplanning/rop-statistical-yearbooks/|url-status=live|publisher=Republic of Palau Bureau of Budget and Planning Ministry of Finance}}</ref> The most populous island is [[Koror]], home to the country's most populous city of [[Koror (city)|the same name]]. The capital [[Ngerulmud]] is located on the largest island of [[Babeldaob]], in [[Melekeok|Melekeok State]]. Palau shares [[maritime boundary|maritime boundaries]] with [[international waters]] to the north, the Federated States of Micronesia to the east, [[Indonesia]] to the south, and the [[Philippines]] to the northwest.
The country was originally settled approximately 3,000 years ago by migrants from [[Maritime Southeast Asia]].<ref>{{cite journal |last1=Clark |first1=Geoffrey |last2=Anderson |first2=Atholl |author2-link=Atholl Anderson |last3=Wright |first3=Duncan |title=Human Colonization of the Palau Islands, Western Micronesia |year=2006 |journal=Journal of Island & Coastal Archaeology |volume=1 |issue=2 |pages=215–232|doi=10.1080/15564890600831705 |s2cid=129261271 }}</ref><ref name="SmithWMP">{{cite journal |last=Smith |first=Alexander D. |title=The Western Malayo-Polynesian Problem |year=2017 |journal=Oceanic Linguistics |publisher=University of Hawaiʻi Press |volume=56 |issue=2 |pages=435–490 |doi=10.1353/ol.2017.0021 |s2cid=149377092 |jstor=26408513}}</ref> Palau was first drawn on a European map by the Bohemian missionary [[Pablo Clain|Paul Klein]]<ref name="Francis X. Hezel, SJ">{{cite web|url=http://micsem.org/pubs/articles/religion/frames/cathmissionsfr.htm|title=Catholic Missions in the Carolines and Marshall Islands|author=Francis X. Hezel, SJ|access-date=15 January 2015|archive-date=28 November 2017|archive-url=https://web.archive.org/web/20171128085201/http://www.micsem.org/pubs/articles/religion/frames/cathmissionsfr.htm|url-status=live}}</ref> based on a description given by a group of [[Palauans]] shipwrecked on the Philippine coast on [[Samar]]. Palau islands were made part of the [[Spanish East Indies]] in 1885. Following Spain's defeat in the [[Spanish–American War]] in 1898, the islands were sold to [[German Empire|Germany]] in 1899 under the terms of the [[German–Spanish Treaty (1899)|German–Spanish Treaty]], where they were administered as part of [[German New Guinea]].
After [[World War I]], the islands were made a part of the Japanese-ruled [[South Seas Mandate]] by the [[League of Nations]]. During [[World War II]], skirmishes including the major [[Battle of Peleliu]] were fought between American and Japanese troops as part of the [[Mariana and Palau Islands campaign]]. Along with other [[list of islands in the Pacific Ocean|Pacific Islands]], Palau was made a part of the United States-governed [[Trust Territory of the Pacific Islands]] in 1947. Having voted in [[1978 Trust Territory of the Pacific Islands constitutional referendum|a referendum]] against joining the Federated States of Micronesia in 1978,<ref>{{Cite web|last=Ming-chao|first=Tang|date=25 September 1978|title=Referendum on the draft constitution for the Federated States of Micronesia, July 1978|url=https://search.archives.un.org/uploads/r/united-nations-archives/8/4/d/84db2d9a2d2771136779b484f2645a596ccea6c4f2301c824603a8e883b724c8/S-0904-0029-03-00001.PDF|access-date=12 June 2021|publisher=United Nations|page=5|archive-date=12 June 2021|archive-url=https://web.archive.org/web/20210612090717/https://search.archives.un.org/uploads/r/united-nations-archives/8/4/d/84db2d9a2d2771136779b484f2645a596ccea6c4f2301c824603a8e883b724c8/S-0904-0029-03-00001.PDF|url-status=live}}</ref><ref>{{Cite web|last1=Nakayama|first1=Tosiwo|last2=Henry|first2=Bethwel|date=14 September 1978|title=Letter to the United Nations|url=https://search.archives.un.org/uploads/r/united-nations-archives/8/4/d/84db2d9a2d2771136779b484f2645a596ccea6c4f2301c824603a8e883b724c8/S-0904-0029-03-00001.PDF|access-date=12 June 2021|publisher=United Nations|pages=8–10|archive-date=12 June 2021|archive-url=https://web.archive.org/web/20210612090717/https://search.archives.un.org/uploads/r/united-nations-archives/8/4/d/84db2d9a2d2771136779b484f2645a596ccea6c4f2301c824603a8e883b724c8/S-0904-0029-03-00001.PDF|url-status=live}}</ref> the islands gained full [[sovereignty]] in 1994 under a [[Compact of Free Association]] with the United States. Politically, Palau is a [[presidential system|presidential]] republic in [[associated state|free association]] with the United States, which provides defense, funding, and access to social services. Legislative power is concentrated in the [[Bicameralism|bicameral]] [[Palau National Congress]]. [[Economy of Palau|Palau's economy]] is based mainly on tourism, [[subsistence agriculture]] and fishing, with a significant portion of gross national product (GNP) derived from foreign aid. The country uses the United States dollar as its official currency. The islands' culture mixes Micronesian, [[Melanesia]]n, Asian, and Western elements. Ethnic Palauans, the majority of the population, are of mixed [[Micronesians|Micronesian]], [[Melanesians|Melanesian]], and [[Austronesian peoples|Austronesian]] descent. A smaller proportion of the population is of Japanese descent. The country's two [[official language]]s are [[Palauan language|Palauan]] (a member of the [[Austronesian languages|Austronesian]] language family) and English, with Japanese, [[Sonsorolese language|Sonsorolese]], and [[Tobian language|Tobian]] recognized as [[regional language]]s.
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