The Port of Palacios is located on the shores of Tres Palacios Bay off Matagorda Bay on Texas' central coast. The Port of Palacios is about 33 kilometers (21 miles) east of Point Comfort. The Port of Palacios 26 kilometers (16 miles) west-northwest of Matagorda Harbor. About half-way between Houston and Corpus Christi, the Port of Palacios is linked to those cities via State Highway 35. The 2010 US Census reported that the Port of Palacios had a population of 4718.

Some four hundred vessels make their home at the Port of Palacios. It is the third-biggest shrimping port on Texas' Gulf Coast. Industries in the Port of Palacios include agriculture, fishing, and construction. Educational services are important to the local Port of Palacios economy. The Port of Palacios is also a long-standing center for energy, and it is moving to the "green energy" sector. Tourism in the Port of Palacios includes fishing, birding, boating, and eco-tourism.

The Karankawa, a nomadic people, inhabited the area that would become the Port of Palacios. In 1685, Rene-Robert Cavelier, Sieur de la Salle, sailed into and shipwrecked in Matagorda Bay. When English-speaking settlers began to arrive in the future Port of Palacios area, conflict with the Karankawa was frequent. Eventually, the Karankawa people were drive out of the Port of Palacios area.

At the turn of the 20th Century, the site that would become the Port of Palacios was ranch land when the estate of Abel "Shanghai" Pierce offered it for sale in 1901. A development company bought and surveyed the land into lots. Creation of the Texas Baptist Encampment and arrival of the Southern Pacific Railroad brought the first settlement to the Port of Palacios in 1903.

In 1926, Camp Hulen began operations as a training center for the Texas National Guard's 36th Infantry. During World War II, the US War Department leased the camp and made it an anti-aircraft training facility. As many as 14,560 personnel were stationed there, and it was a detention center for German prisoners of war. During this time, the Port of Palacios boomed with new residents. Camp Hulen was closed after the war, and the population began to decline. The 1961 Hurricane Carla created further havoc.

Over the past decades, the population has begun to grow again, particularly with the settlement of immigrants from Vietnam. The Port of Palacios built a waterfront pavilion in 1991. In 2009, the Port of Palacios celebrated its 100th birthday with many celebrations and events.

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