Palace endured a difficult afternoon in the SE25 sunshine, as a disciplined Sheffield United side made it tough for the Eagles to create chances in the final third.
It was a steady start to proceedings at Selhurst Park, with both sides getting a feel for the game in the opening ten minutes. Palace had two half-chances through Kian Flanagan, though one effort was saved and another zipped wide, with the visitors looking to get in behind on the break.
One of those balls over the top, in behind the Eagles' back line, proved critical when a Sheffield cross from the left found Jake Bennett unmarked at the back post and the full-back was able to volley beyond Dion Henry to open the scoring with 12 minutes gone.
The game remained close, with Palace probably edging it on the number of chances created and the amount of the ball they saw, but Sheffield stood firm and made it difficult for the Eagles to carve out clear cut opportunities.
Palace's best chance of a first half equaliser came in the 41st minute when a corner routine led to a scramble in the Blades' box. Eventually it fell to Nikola Tavares, but the centre back's powerful effort zipped wide of the far post meaning the Eagles went into the break behind.
The Eagles started the second half strongly, with Levi Lumeka winning a penalty in the first minute after the restart. His exquisite first touch when latching on to a ball over the top took him clear of Sheffield goalkeeper Jake Eastwood, but the winger was crowded out and then fouled by Eastwood and his defenders. However, Nya Kirby's low spot kick was a tame one, which Eastwood was able to smother.
Minutes later and the visitors had a second when the ball was smashed home in a crowded Palace penalty area. Despite the setback, the Eagles were undeterred and both Luke Dreher and Francis Jno-Baptiste went close to halving the deficit in the minutes that followed.
Sheffield had the ball in the Palace net just after the hour mark, but the goal was ruled out for offside. They did eventually get a third when the ball fell kindly to substitute Jordan Hallam in the Palace area on 82 minutes and the number 15 was able to roll the ball into an empty net.
Hallam's goal was the last real action of the afternoon, as the Eagles fought hard to find a way back into the tie but were ultimately denied by a solid Blades backline.
Palace: Henry; Wan-Bissaka, Tavares, Phillips, Sturgess; Dreher, Kirby; Eyenga-Lokilo (McGregor, 66), Flanagan, Lumeka; J Benteke (Jno-Baptiste, 46).
Subs: Perntreou, Woods, Mitchell.
Sheffield United: Eastwood, Bennett, Kelly, Reed, Graham, Cantrill, Smith (Hallam, 72), Slater, Hirst, Brooks, Mallon.
Subs: Charlesworth, Warhurst, Gilmour, Doherty.
Remaining Under 23's Fixtures - Season 2016-17.
Monday 10th April 2017 v QPR (h) at Dulwich Hamlet FC. Kick-off 1pm
Monday 24th April 2017 v Colchester United (h) at Dulwich Hamlet FC. Kick-off 1pm
Tuesday 2nd May 2017 V Bristol City (h) at Selhurst Park Stadium. Kick-off 1pm.
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