"partner, mate, chum," slang, 1680s, said to be from Romany (English Gypsy) pal "brother, comrade," a variant of continental Romany pral, plal, phral, which are probably from Sanskrit bhrata "brother" (from PIE root *bhrater- "brother"). Colloquial extended form palsy-walsy is attested from 1930. Pally (adj.) is attested by 1895.
"behave as pals; spend time or pursue activities together," 1879, from pal (n.). Originally with in; by 1889 with up; 1915 with round or around. Related: Palled; palling.