The purpose of this study is to understand the tourism development and the sustainable environment in Palau. Through the experience of Palau, Penghu would develop the strategy of tourism development in the future. In-depth interview was used in this study. Interviewees are administrators of Palau Tourist Office. Issues of the tourism development are the main content of the interview. SWOT also used in the study to analyze the method of Palau in tourism industry. In the study, we find: (1) Palau has done a plan for residents, tourisms and places where they managed. (2) The concept of Sustainable development applied in the nature conservation when they did a plan. The result would provide a useful suggestion in the tourism development planning of Penghu.