why processlist list shows limited threads Actually I have set max_connection value set to 500 but processes shows only 266 i.e when I run
show full processlist it shows only 266 processes not more than this however my connection value is 500.
I analyzed every query and found that every query is using single table there is no query which is using 2 tables.
Is any other settings which I am missing? Please suggest on this.Why it is showing only 266 processes?
I interpret your results to say that only 266 connections existed at that moment.  (If there aren't 500 users trying to connect, there won't be 500 rows in the processlist.)
Were you getting some error from other attempted connections not being accepted?  If so, what was the exact text of the error message.
266 connections, each running a query, is a problem.  I highly recommend you find the full text of the query (or queries) involved.  SHOW FULL PROCESSLIST may be useful if the queries were truncated.  Then show us the query, EXPLAIN SELECT ... and SHOW CREATE TABLE.  It is likely that some new INDEX (possibly composite)` would make them run faster -- and you might never see as many as 266 again.