Second-placed City remain four points behind leaders Liverpool after losing 3-2, with Andros Townsend scoring a stunning 30-yard volley as Palace won for just the third time in 12 league games.
Liverpool had extended their lead at the top with a Mohamed Salah-inspired 2-0 victory at Wolves on Friday.
Chelsea stayed fourth as a Jamie Vardy goal was enough to end Leicester’s three-game winless run with victory at Stamford Bridge.
Arsenal are level on points with the Blues after beating Burnley 3-1 in yesterday’s early game, with Pierre-Emerick Aubameyang scoring twice to top the league’s goalscoring charts with 12 this season.
Ole Gunnar Solskjaer got off to a perfect start as Manchester United’s interim manager with a 5-1 thrashing of his former club Cardiff.
The former United striker succeeded boss Jose Mourinho, who was sacked in midweek, and got his first win courtesy of a performance that will encourage United fans as some of their more marginalised talent came to the fore in a performance full of attacking intent.
Fulham will be bottom of the table at Christmas following an uninspiring 0-0 draw at Newcastle, with Huddersfield above them only on goal difference after losing 3-1 to Southampton.
David Brooks scored twice as Bournemouth climbed up to eighth with a 2-0 win over Brighton.
And Watford are one point and two places above the Cherries, with Troy Deeney’s penalty and a Gerard Deulofeu goal enough to end West Ham’s four-game winning run.
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