Christian Benteke's injury-time winner dealt Sunderland a crushing blow after they let slip a 2-0 lead at the Stadium of Light.
Jermain Defoe had put Sunderland in a commanding position with goals in the 39th and 60th minute.
But Alan Pardew's Eagles side hit back within 30 seconds to half the deficit through Joe Ledley before going on to take all three points as Sunderland collapsed.
James McArthur levelled with 15 mintues to go before Benteke popped up with a header in injury time, a devastating blow to Sunderland's morale and confidence.
It ws a crushing defeat for Sunderland, who were in control of the game with an hour gone.
David Moyes made six changes to his Sunderland side from the team that beat QPR in the EFL Cup 2-1.
Defoe back to lead the attack after a calf knock, while Lamine Kone, Steven Pienaar, Javier Manquillo, Adnan Januzaj and Lee Cattermole were all recalled.
Januzaj had sat the QPR win out through suspension, while Patrick van Aanholt was again named in the starting line-up after a health scare saw his late withdrawal against Spurs.
It was a pedestrain start to proceedings, with neither side carving out any clear chances in the opening 10 minutes.
Palace, dangerous on the break, were constantly looking for the knock down from Christian Benteke up front, with Papy Djilobodji and Lamine Kone set for a busy afternoon.
Palace had the first attempt on goal, Joel Ward's diagonal cross finding the head of the Belgian striker, but Jordan Pickford gathered the ball with ease.
It was a warning sign, with Kone clearing over his own crossbar from the six-yard line moments later before Benteke flashed a volley from a corner high and wide.
Sunderland were dealt another injury blow 15 minutes in, Steven Pienaar going off with a hamstring injury, Duncan Watmore on in his place.
Jason Puncheon produced a cross across the face of Pickford's goal, with Benteke prodding out his boot but his effort sailed over the crossbar. The momentum was with Palace.
Jermain Defoe, once again starved of service, finally had a sight on goal just before the half-hour mark.
Patrick van Aanholt produced the cross from the left wing into Defoe but his cheeky backheeled attempt was deflected wide.
Benteke continued to cause problems for the Sunderland defence but it was the hosts that took the lead in the 39th minute.
Eagles keeper Steve Mandanda with a poor pass to Joe Ledley who - under pressure from Januzaj - panicked and then inexplicably lofted the ball back towards his own goal.
Defoe did what he does best, and nipped in for a clinical finish.
Former Newcastle United winger Andros Townsend saw his 30-yard free-kick whistle past Pickford's left-hand post, while Damian Delaney prodded a Benteke knock-down just wide.
Half-time: Sunderland 1 Crystal Palace 0
Sunderland almost gifted Palace a way back into the match ten minutes into the second half.
A van Aanholt free-kick was cleared to Januzaj but his control was poor and he was bullied off the ball as Palace broke at speed.
The ball eventually fell to Jason Puncheon but his effort was pushed wide by Pickford, as Palace showed just how dangerous they can be on the break.
Sunderland doubled their lead on the hour mark.
Defoe saw his powerful shot parried by Mandanda after beating the offside trap but just when it looked like the opportunity had gone, the ball broke to Watmore.
His cross from the left-hand side of the penalty area picked out Defoe eight yards out, who steaded himself before volleying past Mandanda to make it 2-0.
Less than 30 seconds later, Palace had halved the deficit.
Ledley's volley from the edge of the penalty area took a wicked deflection off van Aanholt to wrong-foot England Under-21 international Pickford.
Defoe had a couple of half chances as he went in search of his hat-trick, shooting wide after a great flowing move sparked by Cattermole's intricate pass into the overlapping Manquillo.
Palace kept pushing on in numbers and drew level in the 76th minute, sub Zeki Fryers had been on the pitch less than a minute before he sent over a deep cross from the left wing.
James McArthur beat van Aanholt in the air to nod the equaliser past Pickford in goal, the keeper given no chance.
Moyes turned to his subs bench with five minutes to go, Victor Anichebe on for his Sunderland debut alongside EFL Cup hero Paddy McNair.
Townsend should have scored for Palace two minutes later, who broke at speed, the England international sent his shot wide of the left-hand post though.
There was a late penalty appeal for Palace, the ball rolling off Benteke's hand onto Djilobodji's but the referee waved the appeals away.
Sub Wickham caused problems late on, and he won a dubious free-kick near the corner flag in added-on time.
Benteke beat Kirchhoff to the cross to power home the winner and leave Sunderland still searching for their first win.
Full-time: Sunderland 2 Crystal Palace 3
Sunderland (4-2-3-1) Pickford; Manquillo, Kone, Djilobodji, Van Aanholt; Kirchhoff, Cattermole (C) (McNair, 85), Ndong, Januzaj (Anichebe, 85), Pienaar (Watmore, 15), Defoe
Subs Not Used: Mika, Denayer, O'Shea, Khazri.
Goals: Defoe (39, 60)
Crystal Palace (4-4-1-1): Mandanda, Ward, Delaney (C), Tomkins, Kelly (Fryers, 75), Ledley, Puncheon (Chung-Yong, 90), McArthur, Townsend, Cabaye (Wickham, 71,) Benteke.
Subs Not Used: Hennessey, Fryers, Mutch, Sako, Wynter.
Booked: Cabaye (45), Puncheon (71)
Goals: Ledley (61), McArthur (76), Benteke (90).
Referee: Anthony Taylor (Greater Manchester)