Palayoor is famous for its Christian church, St. Thomas Church which is founded by St. Thomas the Apostle in 52 AD. It was the first Christian Church in India. St. Thomas, the Apostle, arrived in 52 AD at Crangannur {now Kodungallur} with Jewish merchants for the propagation of Christ’s message and through the sea route reached Palayoor in 52 AD and built the Church here. Palayoor also had an ancient Jewish settlement known as the Jews' Hill. Palayoor was connected from the first century onwards even up to this day to other ancient trade centres of Kerala, especially Muziris, by rivers and backwaters. The river and backwater system in the erstwhile Cochin State opens out into the sea at Chettuwaye, Cranganur and Cochin with the three Thomas churches at Palayoor, Kodungallur, and Parur connected together by this system. People from far off lands have found their way to Kerala and to Palayoor since ancient times. The coast was familiar country to the Phoenicians, the Romans, the Arabs and the Chinese long before Vasco da Gama arrived in 1498.
Palayur was the stronghold of the Namboodiri Brahmins (the highest caste in Indian communities). When St. Thomas arrived from Kodungallur, Israelites had a settlement at Palayur, two thousand years ago. Ruins of an ancient Jewish synagogue are still seen outside of a Brahmin temple about a furlong away from the Church. "When Thomas came to the great Brahmin centre of Palayur, a leading Brahmin Gramam (village) among the 64, he came across some Brahmins doing the Pithru Yajna or Pooja to the manes or ghosts of deceased ancestors. They were throwing water into the air (Tharpan) while reciting manthras. The Apostle learned from them the meaning of this ritual and remarked: "If your performance is acceptable to the gods they could keep the water suspended in the air without allowing it to fall again and again". "The Brahmins said that this was unthinkable as it was opposed to the laws of nature. Then Thomas asserted that the One true God he worshipped could do it, and he proceeded to perform a miracle on condition that the Brahmins accept his faith if he is successful. The Apostle, invoking the Holy Spirit, made the sign of the Cross and threw a handful of water up into the sky. After reaching a particular height the water stood still in the air, the particles glittering like diamonds. Looking down the Brahmins could see the cavity made by the removal of the water still there in the pond. Most of the witnesses were baptised on the spot. Although this historical legend has been told and re-told by many people in India, a verification of this legend being known outside India, produced no confirmation. The Synaxarion compiled by the Monastery of Simonos Petra on Mt. Athos, as well as an English translation of Dmitri of Rostov's 17th century Great Collection of The Lives of the Saints, which are multi-volume collections and are extremely detailed and have been checked for an account of this miracle, but there is no such evidence.