Launched in 1996 in Brazil, as part of Fiat's "178 project", the Palio was Fiat's first attempt to build a world car, the same basic design being produced in numerous nations around the globe. Four principal models were produced, a hatchback, sedan / saloon, pickup and station wagon / estate, different versions being built in different countries. The powerplants, both diesel and petrol, also varied from region to region depending on local production capability, legislation and market requirements.
The basic chassis was a development of the Fiat Uno, but little remained unchanged. The entire structure was significantly stronger in order to be suitable on the rougher roads found in some of the markets for which it was intended, as was the suspension. The body was a completely new design by the I.DE.A Institute of Turin, who also designed the new interior.
Production began in 1996 in Brazil and was followed later that year by a plant in Argentina. 1997 saw production starting in Venezuela, Poland and Morocco whilst Turkey started building the same car in 1998. India and South Africa began production in 1999, Egypt in 2001 and China in 2002.
In 2001 the model had its first facelift. The new design was made by the Italian automobile designer Giorgetto Giugiaro. This facelift included new front and rear fascias, and a brand new interior. Also, new engines came for the Palio: the FIRE 16 valve 1.0L and 1.2L and the Sporting engine, a 1.6L 16 valve with 120hp made in Turkey. The Mark II series was the first Fiat to be made in China by Nanjing, and included a "SpeedGear" version.
The Mark III was released in 2004, designed again by Giorgetto Giugiaro. It was a completely new design, with inspirations in the Fiat Punto and the Fiat Stilo. The 2004 Palio was the very first Brazilian model in the B-segment available with four airbags (two front airbags and two side airbags), parking assistance, and light and rain sensor. In Europe, the new model featured a Mark III front fascia and interior and a Mark II rear fascia. The latest development in Brazil was the launch of a new sport version called the Palio 1.8R which has a new version of the General Motors 1.8 L "Powertrain" engine rated at 115hp (ethanol) and 112hp (gasoline), lowered suspension, new 14 inch alloy wheels, new seats, and other sporting features. The third generation of the Palio had huge sales numbers, even getting higher sales in some months than VW Gol, the Brazilian best-selling car for over twenty-four years.