Palau President's Tommy Remengesau Junior has signed into law a bill that permits 99-year leases of government property including land.
The previous law limited leases to 50 years.
The president says private citizens may also now lease their property to foreign individuals or businesses for up to 50 years with renewal terms of up to an additional 49 years.
President Remengesau believes the extension of leases will aid in the economic development of the nation by allowing investors more time to earn a return on their investments.
He says the present 50-year lease term restriction makes it very difficult for potential investors and the new law will solve that problem.
Opponents of the bill argue that long-term leases "sell out Palau" to foreign investors.