ALBION'S unbeaten league run was ended by Alassane N'Diaye's 63rd-minute winner on an afternoon of pure frustration for the home side.
Palace set out to stifle the division's top scorers from the off but, in a game of few chances, the Baggies still should have opened the scoring, with Luke Moore missing gilt-edged openings either side of the break.
Giant midfielder N'Diaye punished Albion's profligacy by bundling home Danny Butterfield's free-kick against the run of play.
That, coupled with Palace's determined rearguard action during the closing stages, ended Albion's run of eight games without defeat as the hosts failed to notch in a Coca-Cola Championship game for the first time this term.
Albion started the day one point clear at the top, while Palace, who recorded their second league win of the term last weekend, kicked off in 16th.
With so many forward-thinking players - James Morrison, Chris Brunt, Jerome Thomas, Ishmael Miller and Marek Cech - missing, Di Matteo had to get creative with his team selection.
And he sprung a surprise by deploying new boy Gonzalo Jara at right midfield as Thomas began the first leg of a three-match ban.
Fit-again Joe Mattock, Scott Carson, Youssouf Mulumbu, Shelton Martis and Roman Bednar also earned recalls after Tuesday's Carling Cup exit at Arsenal, with Filipe Teixeira, Leon Barnett, Dean Kiely and Simon Cox making way.
There was something of a low key opening to proceedings and it wasn't until the ninth minute that either team recorded even a half-decent effort on goal, with Neil Danns failing to trouble Carson with a speculative 25-yarder.
Albion responded with a mini spell of pressure.
Clint Hill denied Moore an open goal with a back-post headed clearance after Dorrans had turned right-back Butterfield inside out before crossing.
Moments later, defensive colleague Jose Fonte denied Martis a certain goal by blocking his low drive on the edge of the six-yard box after Dorrans' low centre had created havoc in the Palace penalty area.
The game suffered another lull - until Albion produced the move of the game in the 22nd minute.
Jara cushioned Dorrans' crossfield ball into the path of Gianni Zuiverloon who skipped past Victor Moses and into the box before seeing his low centre blazed over by Moore from 12 yards.
More neat football resulted in Moore teeing up Jara just inside the box, but the Chile international could only fire straight at Julian Speroni from an acute angle.
Palace didn't threaten again until the 28th minute when Moses skipped past Zuiverloon and sent a right-footed shot fizzing across the face of Carson's goal.
The Eagles were making life difficult for the hosts by keeping plenty of men behind the ball and harassing them when the Baggies had possession.
Another period of relative inactivity was ended by Moses unleashing a 30-yard drive which sailed well wide of the right-hand post. That was the final action of an instantly forgettable first 45.
Albion upped the tempo at the start of the second half and Bednar inadvertently steered Dorrans' 18-yard drive just the wrong side of Speroni's right-hand post after the Scotland Under-21 international had exchanged a short corner with Koren.
Palace surged straight upfield and Darren Ambrose rippled the side-netting with a fierce 25-yard shot.
The game descended into another war of attrition - until Albion carved Palace open on 58.
Zuiverloon did brilliantly not only to reach Jara's ball down the line but also to centre to the unmarked Moore. The ex-Villa striker looked certain to score as he controlled ten yards out, only to see his right-foot prod blocked at point-blank range by Speroni.
Albion piled forward again moments later but Dorrans fired straight at Speroni from 25 yards when he would have been better served threading through midfield side-kick Mulumbu.
But just as the Baggies were beginning to turn the screw, they fell behind in the 63rd minute against the run of play.
N'Diaye outmuscled Martis to latch onto Butterfield's lofted free-kick into the box before poking past Carson from close range.
There was a strong suspicion N'Diaye handled as he controlled the ball - but the officials gave the goal.
Albion were straight back on the attack and Koren wasn't too far away with a right-foot curler from the edge of the box.
Moments later, Olsson towered above the Palace defence to head Dorrans' corner just over.
Albion piled on the pressure during the closing stages and sub Reuben Reid went agonisingly close to breaking Palace's stubborn resistance when he headed inches wide from Mattock's exquisite centre.
ALBION (4-4-2): Carson; Zuiverloon (Reid 60), Martis, Olsson, Mattock; Jara, Mulumbu, Dorrans, Koren (Wood 78); Moore (Cox 60), Bednar. Subs not used: Kiely (gk), Teixeira, Meite, Barnett.
PALACE (4-3-3): Speroni; Butterfield, McCarthy, Fonte, Hill; N'Diaye, Derry, Danns; Ambrose (Lee 61), Moses, Scannell (Carle 72). Subs not used: Flahavan (gk), Hills, Davis, Ertl, Cadogan.
GOAL: PALACE - N'Diaye (63).
BOOKINGS: ALBION - Bednar (unsporting behaviour 35), Mulumbu (dissent 71), Cox (dissent 90+1). PALACE - Derry (foul 45), Carle (kicking ball away 89).
REFEREE: R Booth (Nottinghamshire).
ALBION STARMAN: Jonas Olsson.