Palou began karting in 2003. In 2012 he won the KF3 category of the WSK Euro Series and finished runner-up to George Russell in the CIK-FIA European Championship.
He made his open-wheel debut in 2014 in the Euroformula Open Championship with Campos Racing, winning the season opener at the Nürburgring and the finale at Circuit de Barcelona-Catalunya and finishing third in the standings.
In 2015, Palou graduated to the GP3 Series with Campos Racing. He suffered reliability issues and errors in the first half of the season. At Spa-Francorchamps he scored his first GP3 points, finishing seventh in race one and leading most of race two before falling to fifth. At Monza he started from the front row in race two. At Sochi a new engine solved his persistent top-speed deficit; he qualified a tenth from pole and finished fourth in race one. At Yas Marina Circuit he held pole for race two, led from start to finish, and won with a 4.4-second margin over Antonio Fuoco of Carlin, becoming the first Spanish driver to win in the GP3 Series. He returned for a second GP3 season in 2016, finishing 15th overall.
In 2017, Palou competed in three rounds of the World Series Formula V8 3.5 with Teo Martín Motorsport, taking three pole positions and one race win, earning tenth in the championship. He also made two Formula 2 appearances with Campos Racing that year, scoring five points and finishing 21st in the championship.
Also in 2017, Palou competed in Japanese Formula 3 for Threebond with Drago Corse, winning three races and finishing third behind Mitsunori Takaboshi and Sho Tsuboi.
In 2018, Palou contested a full season of the FIA Formula 3 European Championship with Hitech Bullfrog GP, recording seven podiums and finishing seventh.
Palou returned to Japan in 2019, racing in Super GT GT300 with McLaren Customer Racing Japan, partnered with 2004 24 Hours of Le Mans winner Seiji Ara. They took one podium at Autopolis and finished 15th in the championship. In Super Formula with TCS Nakajima Racing, Palou won from pole at Fuji Speedway and entered the final round at Suzuka as championship favourite. A ventilation duct problem early in the race dropped him to 19th, leaving him third in the final standings.
Palou moved to the IndyCar Series for 2020 with Dale Coyne Racing with Team Goh, managed by former IndyCar driver Roger Yasukawa. His debut at Texas Motor Speedway ended in a collision with fellow rookie Rinus VeeKay. He took his first IndyCar podium at Road America.
Palou signed with Chip Ganassi Racing to drive the No. 10 Honda. He won the season opener at Barber Motorsports Park and finished second in the 2021 Indianapolis 500 behind Hélio Castroneves' record-tying fourth victory. Three engine-change penalties were imposed on him by IndyCar during the season. He won at Road America after Josef Newgarden suffered a gearbox failure, then took his third victory at Portland from his first earned pole. At the Long Beach finale, with only Palou, Pato O'Ward, and Newgarden mathematically in contention, O'Ward was eliminated in a first-lap accident and Palou finished fourth to clinch the title with a 35-point margin. He became the third Chip Ganassi driver to win the IndyCar championship after Scott Dixon and Dario Franchitti, and the first Honda driver other than Dixon to win in the Dallara DW12 turbo V6 era. He also won the Mario Andretti Cup as the season's top scorer on road and street courses.
Palou finished fifth in the 2022 championship (tied on 510 points with Scott McLaughlin, separated by countback), winning the season finale at Laguna Seca. The title went to Will Power.
Palou clinched the 2023 Indianapolis 500 pole with a new pole record speed of 234.217 mph, surpassing Scott Dixon's previous record. He won five races during the season — at the GMR Grand Prix, the Detroit Grand Prix, Road America, Mid-Ohio, and Portland — and clinched his second IndyCar title one race early at Portland.
Palou recorded eight top-five finishes in the first ten races of 2024, winning on the Indianapolis Motor Speedway road course and at Laguna Seca, and also won the non-championship $1 Million Challenge. His consistency throughout the remainder of the season secured the title ahead of Colton Herta, Will Power, and Scott McLaughlin, making him the first IndyCar driver to win back-to-back championships since Dario Franchitti in 2009, 2010, and 2011.
Palou won the opening two rounds at St. Petersburg and Thermal, then won three consecutive races at Barber, the IMS Grand Prix, and the Indianapolis 500 — his first oval victory and the first Indianapolis 500 win by a Spaniard. He won at Road America after passing teammate Scott Dixon with two laps remaining. At Mid-Ohio he led Dixon by four seconds with six laps to go before going off track, allowing Dixon to pass for the win. Palou won from pole at Iowa Race 2 and at Laguna Seca. At Portland he clinched his fourth IndyCar title and third in succession, becoming the first driver since Dario Franchitti in 2010 to win both the Indianapolis 500 and the IndyCar championship in the same season.
Palou won three of the first five rounds — at St. Petersburg, Barber, and Long Beach.
On 12 July 2022, Chip Ganassi Racing issued a press release stating they had extended Palou's contract for 2023. Palou disputed the statement via Twitter, claiming a quote attributed to him was created without his approval, and announced his intention to join McLaren Racing. McLaren simultaneously announced they had signed Palou. Chip Ganassi filed a civil lawsuit against Palou in Marion County, Indiana, on 27 July 2022. On 14 September 2022, a settlement was reached: Palou would remain with Chip Ganassi for 2023 and serve as a test driver for McLaren on the MCL35M, with a move to McLaren planned for 2024.
In August 2023, Palou informed McLaren CEO Zak Brown that he had no intention of honouring his 2024 contract, citing a lack of confidence in McLaren's ability to secure him a Formula One seat. McLaren Racing and Arrow McLaren filed a lawsuit for nearly $23 million in the UK Commercial Court, seeking to recover investments including future sponsorship revenue, test costs, replacement costs, and a $400,000 advanced 2024 salary. In January 2026, the London High Court ordered Palou to pay $12 million to Arrow McLaren, dismissing the separate McLaren Racing claim.
In September 2022, McLaren announced Palou in their Testing of Previous Cars programme. He tested the MCL35M at Circuit de Barcelona-Catalunya and later at the Red Bull Ring alongside Pato O'Ward. He made his official Formula One free practice debut at the 2022 United States Grand Prix. On 1 December 2022, McLaren named him reserve driver for the 2023 Formula One season; he drove the MCL35M in a test at the Hungaroring alongside Oscar Piastri.
Palou owns Palou Motorsport, which competes in the Eurocup-3 series. The team secured three podiums in its debut 2023 season through Javier Sagrera. In 2025, James Egozi delivered three wins across the Eurocup-3 Spanish Winter Championship and the main championship.
Palou also competed in the 2025 12 Hours of Sebring with Meyer Shank Racing in the GTP class.
Palou and his wife Esther welcomed their first child on 4 December 2023. They reside in Indianapolis.
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