Palacios is on State Highway 35 halfway between Houston and Corpus Christi in the southwestern corner of Matagorda County. The town is also on Tres Palacios Bay (after which it is named), an inlet of Matagorda Bay off the Gulf of Mexico. The name of the bay is Spanish for "Three Palaces." An apocryphal story has it that sailors from a Spanish ship that wrecked in Matagorda Bay thought they saw palaces on the shoreline. As they neared the shore, however, the palaces disappeared. It is thought that the bay and the Tres Palacios River were actually named for José Félix Trespalacios. In 1901 the future site of Palacios was part of the bull pasture offered for sale by the estate of Abel H. (Shanghai) Pierce. The Texas Rice Development Company purchased the land and subdivided it into 160-acre tracts. The mile-square tract on Tres Palacios Bay at Hamilton Point was sold by the Palacios City Townsite Company, a subsidiary of the development company. The town of Trespalacios was surveyed into lots in 1902. Since there was already a nearby post office named Tres Palacios the new town changed its name to Palacios. The development company paid a bonus to the Southern Pacific to extend its line to Palacios.
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Trespalacios is classified as a Town
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