In spite of dominating the first half, Forest conceded a second-half goal to give Crystal Palace all three points.
Forest had the lion's share of the chances in the first half and could have been two goals up at the break if it hadn't been for some excellent goalkeeping from Julian Speroni.
After having only one shot on target in the first 45 minutes, Palace took the lead ten minutes into the second. Forest failed to find the form they had in the first half and, unable to make the final ball pay, they suffered their fourth straight defeat.
Forest, playing towards the Trent End in the first half, were gifted a chance in the second minute when an error by Patrick McCarthy gifted the ball to Marcus Tudgay. He ran with pace to catchup with the ball before it crossed the line and squared it back to the penalty spot ,but Garath McCleary couldn't get to it in time.
And Forest had another chance with a cross from wide right by Guy Moussi which flew towards the back post and, as Speroni tried to reach the ball, it went just wide of the post.
A quick break by Palace saw Glenn Murray try to catch Lee Camp out with a shot from 25 yards but the Forest keeper dived to his right to punch the ball away.
Forest, down to ten men while Wes Morgan tried to work off an injury, twice came close to opening the scoring.
The first chance came from another defensive error from Palace, giving Paul Anderson a chance to show his pace and races into the box, sending the ball towards the far corner. It had Speroni beaten but Anthony Garden did well to dive in and turn the ball away for a corner.
And from the corner the ball was deflected from Moussi to the head of Luke Chambers who diverted the ball towards goal, forcing an excellent save from Speroni.
And a long-range effort from McCleary produced another save from the Palace keeper.
Morgan came back on for a short while but was replaced in the 20th minute and, with no defenders on the bench, Andy Reid came on, with Moussi moving back into defence.
Meanwhile Anderson also went down injured in a challenge and although he carried on he was clearly struggling with pain to his left shoulder.
Another great shot by McCleary, this time from the edge of the penalty area, produced yet another good save by Speroni.
And there were calls for a penalty from the corner when Chambers was clearly held back by his shirt in front of the goal.
Play was more scrappy towards the end of the half, with Palace started to push forward but without effect.
Palace had a chance in the 45th minute from a free kick from the right. Sean Scannell sent it low into the penalty area and Gardner scooped the ball upwards, forcing Camp to tip it over the bar for a corner.
Forest made a quick break and had a stoppage time chance when Chris Gunter put in a good cross but it bounced awkwardly for Tudgay and the ball went out the other side of the post.
Forest had a golden opportunity to open the scoring at the start of the second half when the ball was fed in from the right by Mc Cleary. It came to Tudgay's feet and he fed the ball to Radi Majewski who lifted it over the bar from 14 yards.
But after Forest had dominated the game it was Palace who took the lead when Wilfreid Zaha turned away from Greg Cunningham, leaving the Forest player on the floor, to play the ball forward to Glenn Murray who slid it past Camp and inside the far post.
Forest made a quick break to try and get straight back on level terms. Cunningham crossed from the left and Tudgay did well to get a header on goal, but it was an easy save for Speroni.
And they made another fast break down the left with the ball being fed to McCleary whose cross at a tight angle forced Speroni to tap the ball over the bar for a corner.
A double substitution for Forest saw the long-awaited return of Dexter Blackstock, coming on to a huge welcome from the home supporters. He came on for Majewski while Lewis McGugan replaced Paul Anderson.
Blackstock was quickly involved when he won Forest a free kick after being fouled in the middle of the D. It was the perfect spot for McGugan to shoot from but he fired it straight into the wall, coming back out for Reid, whose shot was also blocked.
Forest failed to create much up front as the game neared the final whistle. They failed to make the final ball pay and when McGugan did get a shot on target it went straight into the arms of Speroni.
And as the five minutes stoppage time a header from Blackstock also went straight to the Palace keeper.
Nottingham Forest: Camp, Chambers(C), Morgan(Reid 20min), Gunter, Cunningham, Moussi, Greening, Majewski,(Blackstock 72min) Anderson,(McGugan 72min) McCleary, Tudgay
Subs not used: Smith(GK), Findley,
Bookings: Cunningham 55min, Greening 55min, Moussi 71min, Blackstock 90+4min)
Crystal Palace: Speroni, Clyne, Wright, Parr, McCarthy(C), Gardner, Scannell(Easter 81min, Jedinak, Zaha, Murray, O'Keefe(Dikgacoi77min)
Subs not used: Price, Ambrose, Martin
Bookings: Jedinak 37min, Zaha 55min, Murray 69min
Scorer: Murray 56min
Referee: P Gibbs
Attendance: 21,405 Away 959