At the time of its establishment as a town by Alfonso XI, Palos was part of the Almohad kingdom of Niebla, and was a small nucleus whose population subsisted on fishing and took advantage of the area's geographic protection against pirates and storms.

He was only fourteen when Juan I of Castile granted him the towns of Palos and Villalba del Alcor in 1379 to make up for the fact that Pérez de Guzmán was forced to give up Huelva and Gibraleón, which had become part of the county of Medinaceli.

Palos's Golden Age is considered to have occurred in the 15th century (especially between 1470 and 1479), when it increased its population to 2,500 inhabitants and its economy, based on fishing and seafaring expeditions to Guinea, flourished.

Castilian naval forces always included natives of Palos, who were considered navigational experts: ...because only the men of Palos know the ancient sea of Guinea, and were used to fighting the Portuguese from the outset of the war, and to snatch from them the slaves acquired in exchange for vile goodsNevertheless, the war ended in defeat for the Castilian forces,[5] and Ferdinand and Isabella, in the Treaty of Alcáçovas (1479) gave up all rights to Atlantic and African lands and seas, with the exception of the Canary Islands, which remained Castilian.

Palos is also the site of the Rábida Monastery where Columbus consulted with the Franciscans about his plans for organizing an expedition of discovery.

However, during the same century, Catalan investors established a viticultural industry centered at Palos, and the population slowly reached its pre-1492 levels.

John Paul symbolically crowned the Palos's patron saint, the Virgin of Miracles (Virgen de los Milagros).

This recommendation was made by M. S. Powell, the local postmaster, whose ancestor Pedro Alonso Niño sailed with Christopher Columbus from Palos de la Frontera.