The community was named for its founder, Swedish settler Anna Palm, a widow with six sons, who arrived in 1853. The family lived in tents, and eventually built a house. The Palm family was shortly followed by other Swedish immigrants. The Palm Valley Lutheran Church was built in 1872 and doubled as a schoolhouse. In 1970, the church was designated a Recorded Texas Historic Landmark. Anna's son Andrew J. Palm built his own home in 1873. The house was moved to Round Rock in 1976. Two years later the home was also designated a Recorded Texas Historic Landmark and is open to the public as the Palm House Museum. During its populous years, Palm Valley was primarily a Swedish community. It has since become a ghost town.