Billy Sharp bagged a last-gasp equaliser as Alex McLeish’s managerial reign got off to a dramatic start.
The Reds had looked to be heading to a defeat they barely deserved before Sharp popped up in the fourth minute of added time to make it 2-2.
Glenn Murray’s second goal of the afternoon – eight minutes from time – had looked like settling the contest at a rain-sodden City Ground.
But Sharp had other ideas and he sparked wild celebrations among the crowd of 23,703 as he followed up his two-goal blast against Leeds on Boxing Day with his late, late show.
It was the least McLeish’s men deserved as they had already gone close through Sharp, Elliott Ward and Chris Cohen.
Forest were forced to make one change to the side that had beaten Leeds 4-2 on Boxing Day with Alan Hutton ruled out through illness. Greg Halford was given the job of replacing the Scottish international at right back.
McLeish was given a warm welcome when he was paraded on the pitch ahead of kick-off before taking his seat in the directors’ box, leaving Rob Kelly and Jimmy Floyd Hasselbaink to control things from the technical area.
Forest posed the first goal threat as Reid sent over a left-wing cross after just two minutes, Dexter Blackstock headed back across goal and Palace bundled the ball behind for a corner.
But it was Palace who took the lead with nine minutes on the clock. Former Derby defender Dean Moxey sent over a superb cross from the left and Murray was on hand at the far post to add the crucial final touch.
The Reds looked to respond in quick-fire fashion and they were also handed an equaliser as visiting ‘keeper Julian Speroni spilled a fiercely struck Sharp shot, but only at the expense of a corner.
Sharp went even closer to a leveller just before the half hour mark as he planted a header from a Radi Majewski cross against Speroni’s left-hand post.
The Argentinean ‘keeper was finally been beaten on the stroke of half-time ... and in some style as Reid capped an outstanding first half display with a wonder strike from 25 yards out.
There was still time before the interval for Ward to go close to edging the home side in front as his goal-bound shot from a partially cleared corner was blocked.
Forest did an effective job of keeping England international Wilfried Zaha quiet in the first half but the livewire winger went close to restoring Palace’s lead early in the second half as he fired across the face of goal after he had been given space to shoot.
The Reds responded and Speroni made a smart reaction save to keep out a long-range shot from Chris Cohen that appeared to take a deflection along the way.
Forest made a change midway through the second half with Lewis McGugan replacing Majewski in a like-for-like substitution.
Another teasing cross from Reid presented a half-chance for Sharp but the two-goal hero against Leeds headed over the bar.
Zaha’s afternoon came to an end 18 minutes from time as Ian Holloway made a double substitution. Andre Moritz also made way as Jermaine Easter and Jonathan Williams entered the action.
Sharp provided a heart-in-the-mouth moment when he diverted a Yannick Bolasie corner just inches wide of his own goal.
Henri Lansbury joined the action with little more than 10 minutes remaining – at the expense of Cohen – as The Reds pressed for a winner.
But it was Palace who bagged the game’s third goal as Murray sent a looping header from a Bolasie ball into the box over Lee Camp.
Forest immediately sent on Simon Cox but McGugan almost levelled matters a minute from time as he forced Speroni to make a sprawling save after a mazy run into the area.
But it was Sharp who again proved the hero, firing home from close range after his initial effort had rebounded off Speroni’s left-hand upright.