Darren Purse headed the Bluebirds into a ninth minute lead, but the visitors equalised just before the interval.
Tony Capaldi challenged just outside the area but referee Lee Mason pointed to the spot and Ben Watson levelled.
The Bluebirds fielded the side held by Scunthorpe last time out, while Palace had 15-year-old John Bostock in midfield.
Kasper Schmeichel punched clear a Watson corner in the opening minutes as Cardiff failed to hold on to the ball he was forced to make another save from Watson's seventh minute drive.
Two minutes later, the Bluebirds were ahead with a simple set piece goal.
Stephen McPhail swung over a corner and Purse thundered a header into the roof of the net.
Schmeichel was back in the action in the 14th minute beating away a shot from Bostock as Palace threatened on a breakaway.
They levelled matters in the 41st minute when Capaldi brought down Tom Soares and Palace were delighted to go in at the break on level terms.
Six minutes into the second half Jimmy Floyd Hasselbaink turned his defender and fired low towards goal, but his shot lacked power and was easily gathered.
Another chance went begging in the 58th minute when a Paul Parry centre went across the danger area but no-one was on hand to touch it home.
City were now looking vulnerable at the back and Schmeichel had to leap to his left to clutch a curler from Paul Ifill.
Trevor Sinclair joined Steve Thompson upfront with ten minutes remaining, but City were still unable to open up the Palace defence.
Hasselbaink had a couple of chances late on but he failed to trouble the keeper and it was another two points lost as far as the home side were concerned.