It's remote and closer to the Philippines than any other PIF member. It's attached to the US after signing a free association pact with Washington DC in 1994.
And it's well-off for the region, thanks to that US tie-up, and a lucrative tourism industry.
But Palau's most relevant anomaly ahead of this week's summit is its diplomatic recognition of Taiwan, which upends the table from recent gatherings.
It is the first time since 2019 that a Taiwan-recognising nation is playing host to the region.
Which means that any talk of strategic competition in the region will put China on the back foot.
"The environment of holding this PIF in Palau really highlights the geo-strategic challenge going on," Robert Underwood, the director of the Pacific Centre for Island Security, tells AAP.
That recognition places Taiwan on an almost-even playing field when it comes to its diplomatic efforts in the region.
With the support of its local embassy, Taiwan has sent a large delegation of officials, led by its foreign minister, and even staged a pre-summit symposium for delegates.
However, engaging directly will be a no-go for political attendees.
Given Taiwan's fierce competition with superpower China, Beijing insists that countries which recognise it - the vast majority of states - do not develop relationships with the self-governing island.
Dr Underwood, the US House of Representatives member for nearby Guam from 1993-2003, said Beijing's assertiveness had extended to asking Pacific nations for proactive statements of support.
"In advance of going to PIF they've wanted to reinforce (other countries) saying they won't be interacting or participating in any Taiwan-led or Taiwan-friendly events," he said.
The same does not apply to Palau President Surangel Whipps, who is known in the region for being "the leading advocate of a US-led Pacific".
Under Mr Whipps' leadership, Palau is upgrading US military facilities across its archipelago, a move that has raised eyebrows given its eco-tourism credentials.
Dr Underwood said that came down to a power shift in the region over the last half-century, as shown by China's nuclear-capable missile test last month.
"The whole Micronesian area (used to) function as an American lake and Guam was the centrepiece with every imaginable military tool available in order to project power," he said.
"But now that China is on the ascendancy and has demonstrated that by the missile test and by the maturation of their navy ... that changes the dynamics.
"All of the militarisation here and in Guam is now offered as a defensive posture rather than an offensive tool."
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