Palm Island Aboriginal Settlement was gazetted as an Aboriginal reserve on 20 Jun 1914. At the time there were only a handful of Aborigines living on the island. The settlement was properly established in March or April 1918 after a tropical cyclone destroyed the Hull River Aboriginal Reserve, near Innisfail, and its inhabitants were transferred to Palm Island.
The reserve was re-gazetted twice, in 1938 and in 1941, each time with the addition of a few surrounding smaller islands.
Palm Island Aboriginal Settlement was an Aboriginal community located 65 km north of Townsville, occupying an area of approximately 15000 acres. By 1939 it had a population of 1248 Aborigines. There was a hospital, two schools, a Female Welfare Organisation with a Home Training Centre, an Old People's Home, a Child Welfare Centre with baby and child clinics, dormitories for children, women and youths, churches of various denominations, a curio shop, sawmill and logging operations, and a workshop where training was undertaken in carpentry, joining and plumbing.
The Director of Native Affairs Office, through the Palm Island Aboriginal Settlement, controlled and managed the Aboriginal population (adults and children), who were deemed to be 'assisted' or 'wards' of the State. This power was exercised in regards to health, education, employment, housing and accommodation, child welfare, personal finances, pensions and benefits, training, property and the issue of Certificates of Exemption.
The Superintendent of Palm Island Aboriginal Settlement was directly responsible to the Chief Protector of Aboriginals, who in turn was responsible to the Home Secretary's Office. On 5 Dec 1935 when the Department of the Home Secretary became the Department of Health and Home Affairs, the sub-department of Aborigines then occupied the same position relative to the new department.
Palm Island Aboriginal Settlement became known as Director of Native Affairs Office, Palm Island, on 12 Oct 1939, when The Aboriginals Preservation and Protection Act 1939 and The Torres Strait Islands Affairs Act 1939 were passed.