The authors agree that this surname derives from place names distributed along the Italian peninsula. The main places of origin are Palazzolo Acreide, in the Syracuse area; Palazzolo Vercellese, in the Vercelli area; and Palazzolo dello Stella, in the Udine area. F. Miranda adds a fourth reference place name: Palazzolo sull'Oglio, in the Brescia area.

Both authors also consider the possibility that the surname derives from nicknames linked to the first bearers who dwelt in the vicinity of a palatiolus or palatiolum, Latin terms that designated a "small palace", later becoming a surname.

As for the geographical distribution, E. Rossoni notes an important core in Sicily, areas in the Turin, Vercelli, Alessandria and Genoa zone, and a specific presence in Friuli. Miranda broadens this picture and indicates that the surname extends through much of the peninsula, with a presence also in Lombardy, Tuscany, Lazio, Veneto, Emilia-Romagna, Campania and Liguria. In Sicily, he documents it in all the provinces.