Palau will no longer recognise Kosovo, instead favouring Serbia, which claims sovereignty over the breakaway state.
The move was announced by Palau President Tommy Remengesau, who met Serbian President Aleksander Vucic in the capital Belgrade on Monday.
A diplomatic note from Palau's Ministry of State which circulated on social media saidosovo's status should be resolved by dialogue with Serbia, facilitated by the European Union.
Palau, which recognised Kosovo in 2009, said it would support any agreement reached between the two sides.
"The dialogue is paramount and the preferred mechanism to achieve a just, lasting and sustainable solution," the diplomatic note said.
Serbian media reported four more countries were expected to revoke recognition of Kosovo in the coming days.
Palau is the 13th country to sever ties in favour of Belgrade since October, 2017, including Papua New Guinea in July last year.