"Now I feel it's impossible to win the title," Chelsea manager Jose Mourinho told Sky Sports.
"We depend too much on other results. Two weekends ago we lost three points (to Aston Villa) and now it is too much about other results."
As Mourinho's men sank to their first defeat by Palace in 24 years, champions Manchester United ended a week of turmoil with a 4-1 win over Aston Villa, a double by England striker Wayne Rooney easing the pressure on manager David Moyes.
Chelsea captain Terry headed a Joel Ward cross into his own goal early in the second half at Selhrust Park, amid suggestions that the ball touched Palace defender Joe Ledley's hand on the way in.
Former European champions Chelsea stay top on 69 points, one ahead of Liverpool who host Tottenham Hotspur on Sunday.
Manchester City, who are playing Arsenal later on Saturday, are three points off the pace with three matches in hand.
Palace's victory moved them up to 16th place with 31 points, five clear of the relegation zone, and Selhurst Park was rocking at the end of the game with the fans belting out their 'Glad All Over' anthem.
Chelsea thrashed Arsenal 6-0 last weekend but gave a limp display against Tony Pulis' Palace, who had failed to win in their last five matches, scoring just once.
The Eagles grabbed the only goal when Terry headed the ball into his own net at the near post in the 52nd minute, leaving keeper Petr Cech stranded.
Eden Hazard had two opportunities to haul the visitors level but could not find a way past inspired keeper Julian Speroni but Palace also had several chances to make the game safe with a series of lively counter attacks.
"It would have been nice to score one to save anxiety," Pulis said. "Yannick (Bolasie) and Jason (Puncheon) worked their socks off, they give us strength and depth.
"We were threatening and played fantastically well. We have seven games left to get the points we need and it's going to be tough," added Pulis.
ROONEY DOUBLE
Rooney scored two first-half goals, one a penalty, to earn seventh-placed Manchester United a welcome win over a spirited Villa and lift the gloom surrounding Moyes' dismal first term in charge.
The Old Trafford crowd, many of whom booed an anti-Moyes banner that was flown over the ground as the match started, had further cause to grumble when Ashley Westwood put Villa a goal up with a 13th-minute free kick.
Rooney headed United level seven minutes later before putting them ahead from the penalty spot just before halftime as he moved into fourth spot in the all-time league scoring charts.
Christian Benteke missed two glorious chances to draw Villa level before Spaniard Juan Mata scored his first goal since his big-money move from Chelsea in January.
Substitute Javier Hernandez rounded off the win in injury time as United moved on to 54 points, nine off fourth-placed Arsenal in the final Champions League spot.
"I've been saying all the time I've been here, the crowd have been great ... because at times we haven't done as well as we'd like," said Moyes.
"We didn't start the game well today once again but I've got to say the crowd were brilliant, they were behind the team."
Goals by England trio Jay Rodriguez (2), Rickie Lambert and Adam Lallana helped Southampton rout a toothless Newcastle United 4-0.
A Jonathan de Guzman double and a Wayne Routledge strike helped Swansea City beat Norwich City 3-0, only their third win in 18 matches.
Peter Odemwingie notched the only goal in Stoke City's 1-0 triumph over Hull City while Cardiff City fought back from going two down to draw 3-3 at fellow strugglers West Bromwich Albion.
Morgan Amalfitano gave the home side an early lead with a spectacular lob before Graham Dorrans made it 2-0 after nine minutes.
Jordon Mutch's seventh league goal of the season, another impressive long-distance effort, trimmed West Brom's advantage after half an hour and defender Steven Caulker drew Cardiff level midway through the second half.
Thievy Bifouma put West Brom back in front two minutes into injury time before Mats Moller Daehli secured a point for Cardiff with a dramatic last kick of the match.
The Welsh side remain third from bottom in 18th spot, three points off West Brom in 17th.
