Clinton Morrison struck in stoppage time to deny Martin Allen's new-look Leicester a first win of the season.
Stuart Green fired Palace ahead with a blistering free-kick in the first half but DJ Campbell tapped home a second-half equaliser for City.
Patrick Kisnorbo thought he had stolen the points on 87 minutes when he headed home Stephen Clemence's corner.
But Morrison snatched a point when Danny Butterfield's free-kick caused havoc in the box and he tapped home.
Crystal Palace boss Peter Taylor:
"We kept going and that is what pleased me.
"It wasn't a particularly good display on the ball, but the togetherness and spirit was excellent after we hit with two corners, which was disappointing.
"We probably had too many forwards on the pitch at the end but it was worth it as we ended up getting the equaliser in stoppage time.
Leicester manager Martin Allen:
"We were confident and we passed the ball well in the opening 45 minutes and that was pleasing.
"In the second half I urged them to have more self-belief and it was a fantastic, positive response.
"I'm delighted with the players and we are moving in the right direction, no doubt about it."
Crystal Palace: Speroni, Lawrence, Hudson, Cort, Fonte (Butterfield 46), Craig, Green (Kuqi 70), Soares, Kennedy (Freedman 70), Scowcroft, Morrison.
Subs Not Used: Flinders, Martin.
Goals: Green 33, Morrison 90.
Leicester: Fulop, N'Gotty, Kisnorbo, McAuley, Clarke, Newton (Chambers 82), Clemence, Wesolowski, Sheehan (Porter 55), Campbell, De Vries (Hume 46).
Subs Not Used: Henderson, Kishishev.
Booked: Kisnorbo, Clemence.
Goals: Campbell 63, Kisnorbo 87.
Ref: M Russell (Hertfordshire).