Goals from Crystal Palace duo Paul Ifill and Sean Scannell sent Leicester crashing out of the FA Cup and set up a fourth round clash with Watford.
Ifill struck six minutes before the interval, beating keeper David Martin to his left with a low deflected shot.
Striker Scannell made it 2-0 shortly after the break, converting Alan Lee's pass with a close-range strike.
Max-Alain Gradel ensured a nervy finish with his injury-time goal but Crystal Palace held on to progress.
Palace were worthy winners with Lee twice going close early on with a shot from a tight angle and a decent header from Danny Butterfield's cross.
606: DEBATE
Steve Howard had Leicester's best chance of the half when he looped a header on to the roof of the net before Ifill broke the deadlock.
Scannell made the game safe when he latched on to Lee's through ball and lifted the ball over Martin for 2-0.
Leicester pushed for a way back into the game and Julian Speroni saved well from Ashley Chambers' fierce drive before Matt Oakley poked wide from an open goal.
Gradel gave visitors hope when he swept home Ashley Chambers's cross in the fourth minute of injury time, but by that time it was too late for Leicester to find an equaliser.
Crystal Palace manager Neil Warnock:
"It was all about getting into the next round, but last week was so bad - at least there was some goalmouth action this time.
"I thought we were fired-up. I've told the lads that they'll soon forget the nights like this, when you make progress.
"I wasn't bothered about the cup last year - which was a shame. But with not long to go in my career, I've told the lads I want a cup run."
Leicester manager Nigel Pearson: "The league is always our priority, but I'm disappointed nonetheless.
"I thought we gave a decent account of ourselves. The first half was even, but the first goal opened it up.
But over the two games, I think we acquitted ourselves well."
Crystal Palace: Speroni, Butterfield, Lawrence, Hill, Clyne, Derry, Carle, Danns, Moses (Scannell 31), Lee (Kuqi 64), Ifill (Andrew 78).
Subs Not Used: Flahavan, Hills, Ertl, Comley.
Goals: Ifill 38, Scannell 55.
Leicester: Martin, Edworthy (Gilbert 76), Tunchev (Morrison 21), Hobbs, Mattock, Oakley, Andy King, Berner, Gradel, Howard, Dickov (Chambers 64).
Subs Not Used: Cisak, Adams, Porter, Powell.
Booked: Chambers, Gradel.
Goals: Gradel 90.
Att: 6,023
Ref: Steve Tanner (Somerset).