Palazzo is more broadly used in Italian than the English word “palace”. In Italy, a palazzo is a grand building of some architectural ambition that is the headquarters of a family of some renown or of an institution, or even what is called in English a “block of flats” or a tenement in multiple occupancy.

Shops on the ground floor and flats at the top of a modern palazzo are not at all incongruous: historically, the ground floors of even a great family's Palazzo could be trade and domestic offices often open to servants, tradesmen, customers and the public, whilst the smartest floor (the piano nobile), kept private for the family together with upper floors and apartments, were cleaner and safer above ground level. There were (and are) often separate, sometimes external, stairs to the humblest attic rooms and roofs used by the staff.

The words “palazzo” (Italian), “palace” (English), “palais” (French), and the other similar words come from the name of the Palatine hill in Rome (in Latin, Palatium). On this hill the patrician family Julia (“gens Julia” in Latin) owned some land and built their residence. When Octavian became Roman emperor after his succession to Julius Caesar, their home and the name of the Palatine hill itself became synonymous with Imperial residence.