As of the censusGR2 of 2000, there were 4,533 people, 1,472 households, and 1,058 families residing in the city. The population density was 465.5/km² (1,206.3/mi²). There were 1,555 housing units at an average density of 159.7/km² (413.8/mi²).

The racial makeup of the city was 80.94% White, 2.05% Black or African American, 8.18% Native American, 1.06% Asian, 0.33% Pacific Islander, 1.15% from other races, and 6.29% from two or more races. 3.51% of the population was Hispanic or Latino of any race.

There were 1,472 households out of which 47.4% had children under the age of 18 living with them, 50.3% were married couples living together, 16.6% had a female householder with no husband present, and 28.1% were non-families. 23.0% of all households were made up of individuals and 7.5% had someone living alone who was 65 years of age or older. The average household size was 2.81 and the average family size was 3.29.

In the city the population was spread out with 33.6% under the age of 18, 11.8% from 18 to 24, 28.7% from 25 to 44, 16.8% from 45 to 64, and 9.1% who were 65 years of age or older. The median age was 29 years. For every 100 females there were 98.1 males. For every 100 females age 18 and over, there were 93.6 males.

The median income for a household in the city was $45,571, and the median income for a family was $53,164. Males had a median income of $44,716 versus $25,221 for females. The per capita income for the city was $17,203. About 6.0% of families and 12.7% of the population were below the poverty line, including 12.6% of those under age 18 and 4.2% of that age 65 or over.

The valley is renowned for the annual Alaska State Fair, where local farmers produce award-winning vegetables. Popular recreation sites include Hatcher Pass, Crevasse-Moraine Trails, Kepler Lake, Bonnie Lake, Finger Lake and Long Lake.

During the 2000 U.S. Census, there were 1,555 total housing units, and 83 were vacant. 5 of these vacant housing units are used only seasonally. 1,869 residents were employed. The unemployment rate at that time was 10.84%, although 42.46% of all adults were not in the work force. The median household income was $45,571, per capita income was $17,203, and 12.66% of residents were living below the poverty level.

The 2007 Palmer, AK, population is 5,804. There are 1,547 people per square mile (population density). The median age is 27.9. The US median is 37.6. 44.54% of people in Palmer, AK, are married. 12.50% are divorced.

The average household size is 2.8 people. 31.09% of people are married, with children. 16.36% have children, but are single. 80.22% of people are white, 2.56% are black, 1.62% is Asian, 7.93% are Native American, and 7.67% claim ‘Other’. 4.25% of the people in Palmer, AK, claim hispanic ethnicity (meaning 95.75% are non-hispanic).