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Liverpool lost the 2025 Community Shield on penalties after an impressive attacking display at Wembley that was undone by several defensive lapses.
The Reds took the lead early as summer signings Florian Wirtz and Hugo Ekitike combined and the latter fired his effort into the bottom corner.
But parity was restored after Ismaila Sarr was tripped by Virgil van Dijk in the box and Jean-Philippe Mateta netted from the spot.
Jeremie Frimpong restored the Reds' lead with a chip over Dean Henderson that appeared to be a cross, but it took until the 77th minute for Palace to force penalties, when Sarr capitalized on some lax defending from Van Dijk and fired beyond Alisson.
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That forced penalties, and Mohamed Salah, Alexis Mac Allister and Harvey Elliott missed their spot-kicks, handed Palace a 3-2 win.
Winners
Florian Wirtz sparkled on his competitive debut for the Reds and again demonstrated his balletic qualities in a no.10 role.
The summer signings in general had good days at Wembley, with Ekitike and Frimpong scoring and Milos Kerkez impressing.
Ryan Gravenberch missed the game altogether as he recently became a father, and his importance was underlined by the Reds' weak defensive display at times.
Losers
Not often he falls into this category, but Van Dijk was well below his best against Palace and made errors for both both goals.
Took his goal brilliantly with some excellent center-forward play as he laid the ball off, collected it again and fired low and hard past Dean Henderson