early 13c., palais, "official residence of an emperor, king, queen, archbishop, etc.," from Old French palais "palace, court" and directly from Medieval Latin palacium "a palace" (source of Spanish palacio, Italian palazzo), from Latin palatium "the Palatine hill," in plural, "a palace," from Mons Palatinus "the Palatine Hill," one of the seven hills of ancient Rome, where Augustus Caesar's house stood (the original "palace"), later the site of the splendid residence built by Nero. In English, the general sense of "magnificent, stately, or splendid dwelling place" is by c. 1300.
The hill name perhaps is ultimately from palus "stake" (see pale (n.)) on the notion of "enclosure." Another guess is that it is from Etruscan and connected with Pales, the supposed name of an Italic goddess of shepherds and cattle. De Vaan connects it with palatum "roof of the mouth; dome, vault," and writes, "Since the 'palate' can be referred to as a 'flattened' or 'vaulted' part, and since hills are also often referred to as 'flat' or 'vaulted' (if their form so suggests), a derivation of Palatium from palatum is quite conceivable."
French palais is the source of German Palast, Swedish palats and some other Germanic forms. Others, such as Old English palant, Middle High German phalanze (modern German Pfalz) are from the Medieval Latin word.