Mirroring his choice as England manager in October 2015, Hodgson has selected the experienced centre-back to lead the team out in east London this evening after starting him in the Eagles' last five league games.
In place of Milivojevic, Hodgson has fielded another summer signing in McCarthy - with the 28-year-old securing his first league start since the 2017/18 season.
Other than the midfield swap, Hodgson has named the same XI which overcame Norwich City 2-0 last Saturday. Looking to the bench, Victor Camarasa fills the gap left by McCarthy and James Tomkins keeps his place as one of two back-up defenders - continuing his recovery from injury.
Mamadou Sakho has not been named, with Hodgson stating that the Frenchman is overcoming a slight injury.
In other news, Joel Ward makes his 200th league appearance.
West Ham have made two changes to the side which started against AFC Bournemouth: injured goalkeeper Lukasz Fabianski is replaced by Roberto and Pablo Fornals is swapped out for Manuel Lanzini.
On the Hammers' bench, third-choice 'keeper David Martin provides the insurance for Roberto.
West Ham: Roberto, Cresswell, Ogbonna, Diop, Fredericks, Noble, Rice, Yarmolenko, Anderson, Lanzini, Haller.
Subs: Martin, Balbuena, Zabaleta, Snodgrass, Fornals, Wilshere, Ajeti.
Palace: Guaita, Ward, Cahill, Kelly, Van Aanholt, Schlupp, McArthur, McCarthy, Kouyate, Zaha, Ayew.
Subs: Hennessey, Tomkins, Dann, Camarasa, Meyer, Townsend, Benteke.