1historical As two words. Paper with a watermark consisting of an open hand under a five- or six-pointed star, particularly employed in the sixteenth cent.
For further details see, for example, Edward Heawood's "Sources of Early English Paper-supply" in Library (1910) 4th Ser. 10, pp. 436 ff.
2Paper made by hand, as opposed to by machine.
Late 18th century; earliest use found in Samuel Denne (1730–1799), antiquary. From hand + paper.