He applied for a summer fellowship during his first year of medical school and was accepted into the laboratory of Ernst and Berta Scharrer, where Palay carried out his first investigations.
degree in 1943, Palay spent a year as an intern at New Haven Hospital, while in the evenings continuing his research into neurosecretion at the Department of Anatomy at Yale University.
Later, he was promoted to the position of Chief of the Laboratory of Neuroanatomical Science, and while he was at the NIH, he continued his work on the ultrastructure of synapses, as well as studying neurosecretion and neuroglia.
He and his wife Victoria Chan-Palay carried out detailed analyses of the cerebellum, and this work culminated in the publication of their book Cerebellar Cortex: Cytology and Organization (published in 1974).
He also served on several graduate student thesis committees during this period, and shared his expertise in neurocytology with the Biology Faculty at Boston College.