Whereas the belief that political parties are necessary elements of democracy is widespread in political science, it is in fact empirically false. Six small Pacific island democracies function without parties, and several explanations for the absence of parties in these countries have been developed. In the present article, an interview-based qualitative analysis of one of these six democracies without parties – the Republic of Palau – is offered in order to examine why parties are absent here, and how the Palauan democracy functions without parties. The findings of this case study indicate that both size and culture contribute to the non-existence of parties in Palau, and that the role of parties is in many ways fulfilled by clan structures. In several respects the absence of parties is found to undermine the functioning of Palauan democracy, whereas respondents paradoxically indicate that non-elected traditional leadership contributes positively to the performance of democracy in Palau.