City were unfortunate to only hold a one-goal lead at the break following David Silva's early opener, but second-half strikes from Vincent Kompany, Kevin De Bruyne, Raheem Sterling and Nicolas Otamendi saw Pep Guardiola's side cruise to victory and boost their top-four hopes in the process.
Palace went into the match having amassed more points than City over their previous 10 games, but the hosts quickly fell into their stride and took the lead within two minutes when Silva stroked a first-time finish home from inside the box after Martin Kelly failed to get enough on his clearance.
It was the Spaniard's 50th goal for Man City, and he was heavily involved throughout a dominant first-half performance from the home side as they took complete control of the contest.
Fernandinho stung the palms of Wayne Hennessey with a powerful long-range strike, but City's main struggle was turning their possession into clear-cut chances and they could not add to their lead before the interval.
The attacking trio of Leroy Sane, Sterling and Gabriel Jesus were causing Palace all sorts of problems with their pace up front, and all three of them saw efforts kept out around the half-hour mark as City looked for a deserved second.
It was Palace who came closest to getting the game's second goal before the interval, though, as Christian Benteke rose highest inside the area to plant a firm header towards goal which forced Wilfredo Caballero into a smart save down low to his left.
It was a rare foray forward for the visitors, but they did have another sight of goal before half time when the ball broke kindly for Patrick van Aanholt, only for the full-back to snatch at his shot and blaze it over.
Palace would have been pleased to make it into half time with only a one-goal deficit, but their hopes of stealing anything from the game took a major blow shortly after the interval as City made as quick a start to the second half as they had in the first.
Kompany showed the movement and finishing of a seasoned striker to peel away from his marker and slam an emphatic first-time strike into the top corner for his first goal at the Etihad in almost two years.
It was just reward for the home side's dominance, but they were in no mood to stop there and Palace needed the woodwork to come to their rescue shortly afterwards when De Bruyne's free kick clipped the crossbar on its way behind.
Hennessey was the main reason for keeping the score down, though, and the Palace keeper pulled off good saves to deny Fernandinho and Sane as City continued to cut through the City defence almost at will.
The Wales international should have done better when the third goal eventually arrived, though, with De Bruyne passing the ball into the back of the net from outside the area despite Hennessey getting a hand to it.
That goal effectively killed the game off as a contest, but Palace almost grabbed a fortuitous consolation with 20 minutes left when James McArthur's cross deflected off a defender and bounced against the crossbar on its way behind.
Sane deserved a goal for his performance but miscued a decent opening shortly afterwards, and it was the winger on the opposite flank who got City's fourth as Sterling fired a bobbling ball into the bottom corner after being found by Pablo Zabaleta's knockdown.
City added a fifth for good measure with the last meaningful action of the match as Otamendi took advantage of some statuesque defending to latch on to De Bruyne's free kick and plant a firm diving header past Hennessey.
The final result was a fair reflection of City's dominance as they ended a three-match winless streak in style, with the scoreline being enough for them to leapfrog Liverpool in the table on goal difference.
Palace, meanwhile, have now lost three league games on the bounce for the first time since January and remain six points clear of the relegation zone.