Fáilte Ireland says overseas visitors grew to a record 7.4 million, up 9% on 2005, though it expressed some concern on the domestic sector.
Tourism revenue rose to €5.9 billion, and there are now nearly a quarter of a million people employed in the sector.
Irish people staying at home to holiday rose 11%, with 3.7 million domestic trips generating €780m.
Chairman Gillian Bowler said nearly all accommodation providers believe their oversees visitors will perform well next year.
Ms Bowler said while the domestic market was strong, it performed below the international leisure market in recent years, although last year this was confined to the Eastern regions and the North West.
Ms Bowler said that the regional distribution of tourism improved, with the Western seaboard regions recording higher levels than Dublin and the Eastern regions.
Hotels, guesthosuess, B&Bs, hostels and self-catering providers all saw higher occupancy rates in the year.
Fáilte Ireland CEO Shaun Quinn said there was a recovery in the numbers going on activity holidays such as golf, angling, walking, equestrian and cycling trips, following poor numbers in 2005. He said the angling sector received a boost after the decision to end drift netting.
Mr Quinn said over 260,000 people attended the Ryder Cup in September, and that the economic benefit is likely to be more than the targeted amount of €130m, with the main value of the event being its legacy.
He said business tourism is now worth €475m a year to the Irish economy and this is set to rise with the advent of the national conference centre.
In 2007 Fáilte Ireland predicts overseas visitors will grow 5.5% to generate €4.9 bilion and domestic trips will rise 4% to generate €800m.
According to Fáilte Ireland, tourism is now more important to the Irish economy than agriculture, accounting for 3.1% of Gross National Product (GNP) compared to agriculture's 2.3%.
