Unbeaten Birmingham, however, had to endure a tough, lively match as the confident Londoners often threatened to maintain their 100 per cent record.
But Birmingham's win was tarnished when Damien Johnson found himself in hot water after he flung his shirt onto the pitch after being substituted by manager Steve Bruce and now faces a hefty fine.
The Birmingham skipper was not happy to be replaced by Mikael Forssell in the 79th minute and his gestures made it perfectly clear what he thought of the situation.
Forssell was sent on by Bruce in an effort to spark a late winning goal and the ploy was successful with Larsson's late strike.
Johnson's actions highlighted his feelings and frustration, but truth be told the Irishman had not enjoyed a good match against the Championship leaders and was loudly booed by the home fans for his actions.
Palace, meanwhile, were deeply indebted to Gabor Kiraly. The colourful Hungarian international may arouse comment with his grey baggy tracksuit bottoms but there is nothing wrong with his goalkeeping.
The two highlights of his performance to deny Birmingham occurred when he saved at point-blank range from Bruno N'Gotty and then prevented the jinking DJ Campbell from scoring with a reflex finger save.
They were crucial times in the game between two clubs who will be serious promotion candidates on the strength of this display despite Johnson's petulance.
Birmingham's inconsistencies which plagued them last season were again evident against the fast-raiding Palace side.
The introduction of their latest acquisition, Gary McSheffrey, resulted in further tactical changes which took some time to gel.
McSheffrey, however, is going to be a big asset. His tenacious play and contributions from set-pieces quickly became a feature of Birmingham's play.
But at the start they were often too elaborate and moves often broke down as Palace were not slow to exploit the openings which were often engineered by Mark Kennedy enjoying his new role in midfield.
It was nevertheless a major surprise when Palace took a shock e11th minute lead when John McAnuff, who is noted for service from the left, scored with a speculative long-range shot which was deflected by N'Gotty well out of the reach of Maik Taylor.
The goal certainly had the desired effect in forcing Birmingham to be more direct in their attacks and Nicklas Bendtner's 23rd minute equaliser was perfectly executed.
Mehdi Nafti, now showing some of his best form following injury problems, split the Palace with a clever pass which Bendtner controlled and shot in one movement giving even Kiraly no chance of prevent a goal.
The young on-loan player from Arsenal was substituted in the second half - a move which did not go down too well with the home fans who soundly booed the decision.
But the star performer was Kiraly. The Palace keeper certainly confirmed his reputation as a shot-stopper when N'Gotty moved forward to make amends for his earlier transgression to hammer a shot on the turn which Kiraly brilliant saved.
Only an equally outstanding save by Taylor prevented Radhi Jaidi putting through his own goal as Palace stepped up a gear to regain the lead.
Palace were certainly not over-awed by big spending Birmingham on the day.
They competed on level terms for much of the game with the second period fraught with anxious play which neither side could exploit.
This was highlighted when Mark Kennedy blasted wide in the closing minutes as Forssell did only a couple of minutes before the finish.
But Larsson made no mistake as he moved on to a David Dunn cross to hammer his shot past a helpless Kiraly.