Palau's National Congress has passed a bill allowing casino gambling on sparsely populated Angaur island, fifty kilometres from the capital, Koror.
However our correspondent says it is likely legislators will need a veto override to make the bill law, because it is opposed by President Tommy Remengesau.
Mr Remengesau says gambling runs counter to the image of Palau as a destination where a pristine island environment and traditional culture can be enjoyed without intrusion.
He says it is important not to destroy this vision by allowing economic activities that can only taint it.
The President adds that Palau is not desperate.
Congress can override bills that the President has struck down but it is unclear whether the votes can be mustered given that traditional leaders are also opposed to the casino.