The first Palos, a 4th rate iron screw tug, was built by James Tetlow, Chelsea, Mass., in 1865 and was put into service as a yard tug at the Boston Navy Yard the following year. Placed in ordinary in 1869, the tug was converted to a gunboat and commissioned 11 June 1870, Lt. C. H. Roekwell in command.

Departing Boston 20 June for the Asiatic Station, Palos steamed across the Atlantic and through the Mediterranean, becoming the first American warship to transit the Suez Canal 11-12 August, and arrived at Singapore, via Aden and Ceylon 25 September. Following a brief stay at that port, the gunboat put out for Hong Kong and for the next 22 years operated on the China and Japan coasts and inland waters protecting American interests.

In May 1871, the warship sailed from Shanghai for Nagasaki, Japan, and thence Korea as part of the Asiatic Squadron under Rear Admiral John Rodgers carrying U.S. Minister to China, Francis Low on a diplomatic mission to the "Hermit Kingdom." While engaged in surveying the Salee River 1 June, she was fired upon by a Korean fort, two men from the squadron being wounded before return fire stopped the attack. Admiral Rodgers waited ten days for an official apology and then ordered Palos, gunboat Monocacy, and a 650 man landing party into action, the two warships supporting an assault and capture of the main Korean fort 10 June and the taking of four others the next day. The squadron departed the Korean coast 3 July without renewing negotiations but the show of force was ultimately helpful in opening the country to Western trade.

Palos continued her operations on the Asiatic Station into 1891, cruising the Chinese and Japanese coasts, visiting the open treaty ports and making occasional voyages up the Yangtze and Canton Rivers. From June to September 1891, anti foreign riots up the Yangtze forced the warship to make an extended voyage as far as Hankow, 600 miles upriver in protection of American lives and property. Stopping at each open treaty port, the gunboat cooperated with naval vessels of other nations in restoring order and repairing damage. She then operated along the north and central China coast and on the lower Yangtze easing anti-foreign tensions until June 1892 when she sailed for Nagasaki, arriving on the 19th.

Palos was condemned as unfit for further service there 6 July and was decommissioned and sold at auction 25 January 1893. She was subsequently scrapped.