Bangladesh’s Permanent Representative at the UN headquarters in New York Ambassador Masud Bin Momen and his Palau counterpart Ambassador Olai Uludong signed the agreement, the mission said in a statement on Thursday.
Foreign Minister AK Abdul Momen and Palau President Thomas Esang Remengesau Junior witnessed the signing.
Both countries expressed interest to work in the field of trade and tourism, climate change, disaster management, international peace and security.
Palau became independent in 1994. It promotes tourism which along with foreign aid is the mainstay of its economy.
Direct aid was set to wind up in 2009, but the US agreed to an additional package of $250 million in January 2010.
Tourism is low key, although growing in economic importance.
Many visitors come from Taiwan, with which Palau has diplomatic ties. Taiwanese aid boosts the economy. The government is Palau's largest employer.
Monoliths and other relics are reminders of an ancient culture that thrived on the islands, and despite Western trappings many Palauans identify strongly with their traditions and rites, according to BBC.