Palhoça was founded in 1793, when the city was part of the way between Lages and Florianópolis in order to protect the capital state from possible invasions.

The municipality contains part of the 84,130 hectares (207,900 acres) Serra do Tabuleiro State Park, a protected area created in 1975.

The lushly-forested park protects the sources of the Vargem do Braço, Cubatão and D'Una rivers, which supply most of the drinking water for greater Florianópolis and the south coast region.

A shopping mall was inaugurated in 2010 together with a large supermarket, a hotel, and recently a middle-sized department store downtown.

New private neighborhoods have been built, concerned about natural preservation and quality of life, increasing the number of the population and jobs opportunities.