English surname, either a habitational name denoting a person from a lost or unidentified place in Lancashire or Yorkshire (which was apparently named with Old English leah "woodland, clearing" as the final element), or derived from the Old Danish personal name Palli, from Old Danish páll meaning "pole". Alternatively it may sometimes be a variant of Pawley.
Occupational name for a distiller, derived from an East Slavic word (Russian палить (palitʹ), Ukrainian палити (palyty)) meaning "to burn". A famous bearer was Princess Olga Valerianovna Paley (1865-1929), the morganatic second wife of Grand Duke Paul Alexandrovich of Russia.