Palermo scored early through Dorin Goian to beat Serie A leader AC Milan 1-0 on Saturday.
The result means defending champion Inter Milan has the chance to close the gap to two points when it plays Lecce on Sunday, before the sides meet in the city derby on April 2.
Goian took advantage of hesitation in the Milan defense to open the scoring in the 10th minute, and despite enjoying the majority of possession in the second half, Milan failed to find an equalizer.
"It was the type of performance any coach would like to see," Palermo coach Sersi Cosmi said. "We were focused, determined and wanted to win. I hope this can re-ignite our season and helps us get back to the level we were earlier in the season."
Zlatan Ibrahimovic's absence was obvious as Massimo Allegri's side was reduced to shooting from long range in the vague hope of drawing level.
"We are still in a good position," Milan coach Massimo Allegri said. "We were poor in the first half and sat back too much. We improved in the second, but Palermo protected the goal well.
"We have to prepare well over the next two weeks. It won't be decisive for the title, but it will be a very important game."
Palermo dominated the first half and scored when Federico Balzaretti headed on a corner. Milan's defense stopped expecting a whistle for offside, Goian took a touch, and hooked the ball past Christian Abbiati.
Milan hit straight back and Mathieu Flamini fired a low shot that Salvatore Sirigu pushed around the post for a corner. From the set piece Alessandro Nesta was unable to get a touch on the ball as it flashed across the unguarded goal.
Alexandre Pato was high with a free kick and Javier Pastore went wide with a shot after he squeezed between Milan defenders Luca Antonini and Thiago Silva.
Antonio Cassano wasted a great chance to draw Milan level in the 32nd when he blasted wide after Clarence Seedorf picked him out unmarked on the right.
Milan continue to press up to the halftime whistle and Sirigu raced off his line to smother at the feet of Pato just before the break.
After halftime Josip Ilicic and Mauricio Pinilla drew saves from Abbiati as Palermo continued where it left off.
In the 56th, Pastore crossed low for Matteo Darmian, but Antonini closed him out and he scooped the ball into the side netting.
Pato limped off with what looked like a calf injury midway through the half to be replaced by his Brazilian compatriot Robinho.
He quickly added some life to Milan's attack and he set up Flamini for a shot that Sirigu pushed away for a corner. With just over 10 minutes to go the 'keeper kept Palermo in the match again when he blocked Gennaro Gattuso's header.
Palermo was content to sit and defend from the edge of the area, but was still able to hit Milan on the counterattack and Fabrizio Miccoli drew another save from Abbiati when he let fly after cutting in from the left wing.
In injury time Abel Hernandez wasted the chance to wrap up the result when he shanked the ball wide with only Abbiati to beat.
"It was good we had Goian back today," Cosmi said. "He is considered an emerging player, but has already shown his quality and was very impressive against a team as good as Milan."
Lazio meanwhile bounced back from its defeat in the Rome derby last time out to win 1-0 at home to Cesena. Mauro Zarate scored in the second to end a three-month goal drought.
The Argentine poked in Giuseppe Sculli's cross from close range and nearly added a second just before halftime, but shot wide from another Sculli cross.
At the end of the match Zarate went close again following a mazy run and shot past the far post.
