To enhance the prestige of Hawai`i overseas and to mark her status as a modern nation, the Hawaiian government appropriated funds to build a modern palace. The cornerstone for `Iolani Palace was laid on December 31, 1879 with full Masonic rites.

Despite a quick succession of three architects, work progressed at the hands of locally obtained contractors, artisans, and laborers. The building was complete enough by August of 1882 for King Kalakaua to hold a luncheon for members of the Legislative Assembly. In December of that year King Kalakaua and Queen Kapi`olani took up residence in their new home.

The first palace was known as Hale Ali`i (House of the Chief). Kamehameha V changed its name to `Iolani Palace in honor of his late brother and predecessor.

`Io is the Hawaiian hawk, a bird that flies higher than all the rest, and lani denotes heavenly, royal, or exalted. Although the old palace was demolished in 1874, the name `Iolani Palace was retained for the building that stands today.

The new `Iolani Palace was outfitted with the most up-to-date amenities, including indoor plumbing. Gas chandeliers installed when the Palace was first built were replaced by electric lighting five years later (less than seven years after Edison invented the first practical incandescent bulb). The King also installed a modern communications system that included the recently invented telephone.

David Kalakaua is remembered as the "Merry Monarch" because he was a patron of culture and arts, and enjoyed socializing and entertaining. Although the King and his Queen, Kapi`olani, used several residences, `Iolani Palace was the official residence where they performed official functions, received dignitaries and luminaries from around the world, and entertained often and lavishly. It was the center of social and political life for the Kingdom of Hawai`i.

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