On 28 September 2018, a strike‐slip earthquake occurred in Palu, Indonesia, and was followed by a series of tsunami waves that devastated the coast of Palu Bay. The tsunami was recorded at the Pantoloan tide gauge station with a peak amplitude of ~2 m above the water level and struck at high tide. We use the Pantoloan tsunami waveform and synthetic aperture rada displacement data in a joint inversion to estimate the vertical displacement around the narrow bay. Our inversion result suggests that the middle of the bay was uplifted up to 0.8 m, while the other parts of the bay subsided by up to 1 m. However, this seafloor displacement model alone cannot fully explain the observed tsunami inundation. The observed tsunami inundation heights and extents could be reproduced by a tsunami inundation simulation with a source model that combined the estimated vertical displacement with multiple subaerial-submarine landslides. Plain Language Summary The tsunami that devastated Palu and other coastal towns inside Palu Bay on 28 September 2018 was recorded at a sea level monitoring station in Pantoloan. The recorded tsunami wave data are used in an inversion method to estimate the source of the tsunami in the form of an initial seafloor displacement. We found that the seafloor displacement was the main cause of the large tsunami. Satellite images and field survey data suggest that landslides around multiple river deltas also generated local tsunami waves. Our numerical simulations of the tsunami inundation show that the disaster was caused by a combination of the sudden ground and seafloor changes from the earthquake, landslides, and the high tide at the time of the event. ©2019. American Geophysical Union. All Rights Reserved. Show More