The newly promoted Premier League club suffered their first defeat of their pre-season campaign at Broadfield Stadium
The Premier League club were outplayed in front of over 3000 fans at Broadfield Stadium as goals from Billy Clarke, Sergio Torres and Mat Sadler secured victory over Ian Holloway's men.
Palace did have a number of chances to get back into the game, but wayward finishing allowed Crawley to capitalise.
Holloway fielded an experienced side after his team had won their previous pre-season fixture against Dagenham and Redbridge with a number of trialists and young players on show.
However, the likes of Dean Moxey, Mile Jedinak and Damien Delaney could do little to stem the tide of constant attacks from the hosts.
Palace carved out some presentable opportunities in the opening exchanges, but found themselves behind on the 30-minute mark when Clarke tucked away a loose ball in the penalty area.
The half-time break allowed a chance for Palace to make six changes, but Torres doubled Crawley's lead after 74 minutes.
And, with Palace's shooting growing increasingly erratic as the game wore on, Crawley cemented their victory courtesy of an impressive volley from Sadler with two minutes remaining.