City had led through Ilkay Gundogan but two goals in three minutes overturned the scores at Palace led 2-1 at the break.
The ball was lofted in towards the City area and the home team attempted to clear with a couple of poorly placed headers.
City had not lost any of their previous 52 league games against teams outside the traditional "big six", a run dating back almost two years to a defeat at Everton in January 2017.
Parrot uses owner’s Amazon Alexa to play music, order watermelon, lightbulbs
The African Gray is a highly intelligent bird known for its ability to mimic words and sounds. Rocco the parrot has formed a relationship with his owner's voice-activated Amazon Echo.
From 3-1 up City nicked a goal back, and pushed Palace for the remaining ten minutes or so of play up to the 95th minute.
There was to be one final big chance for City to at least salvage a point, only for Gabriel Jesus to head over the bar from a glorious position once picked out by De Bruyne, meaning a second defeat in three league matches for the home side. The two teams meet on January 4 (NZ time).
Crystal Palace inflicted a second loss of the season on Manchester City.
It seemed Man City would kick on and take the game away from Palace after their opener.
Crystal Palace's English midfielder Aaron Wan-Bissaka (L) tries to block Manchester City's German midfielder Leroy Sane (R) during the English Premier League football match between Manchester City and Crystal Palace at the Etihad Stadium in Manchester, north-west England, on December 22, 2018.
PSG's Rabiot agrees Barcelona deal, according to Le Parisien
With the likes of Paul Pogba and Aaron Ramsey linked with the club it seems the club will be busy in negotiating with the player. L'Equipe states that talks of an agreement with Barcelona are untrue, something which has also been pushed by the Catalan media.
Jamie Vardy scored as Leicester upset Chelsea at Stamford Bridge.
But it proved to be too little, too late as the hosts fell to their first home defeat of the season.
Marcus Rashford opened the scoring in just the third minute, with Ander Herrera and Anthony Martial netting either side of a Victor Camarasa penalty for the home side.
"It's complicated but we fight until the last second".
And Watford are one point and two places above the Cherries, with Troy Deeney's penalty enough to end West Ham's four-game winning run.
Putin warns on threat of nuclear war
But we are not striving to have an advantage, we are striving to have a proper balance, ensure our security. Russia's economy registered 1.5 per cent growth last year following the two-year stagnation.
David Brooks scored twice as Bournemouth climbed up to eighth with a 2-0 win over Brighton.