AS Roma are four points behind the leaders after Mirko Vucinic grabbed a hat-trick in a 4-2 victory at home to Udinese.
Argentina striker Diego Milito gave Inter the lead on 11 minutes when he blasted home a penalty after Lucio had been hauled down by defender Cesare Bovo.
Palermo, winners of seven home league games since Delio Rossi took over as coach in November, were level midway through the first half when Uruguay's Edinson Cavani fired in at the near post following Fabrizio Miccoli's clever pass.
Either side could have won with Milito hitting the post from an impossible angle and heading just over before Cavani nodded wide for the Sicilian hosts.
Champions Inter, who have won just one of their last seven Serie A games but have been top since September, looked tired in the closing stages after their exertions in eliminating Chelsea from the Champions League in midweek.
Jose Mourinho's side have nine games left and host lowly Livorno on Wednesday before travelling to Roma on Saturday as a fifth straight scudetto looks much less likely than when they held a nine-point lead in February.
"I'm angry as we could have won at the end," Palermo's man-of-the-match Miccoli told Sky TV. "But anyway we have drawn with champions Inter and the team deserves great applause."
GREAT STRENGTH
Roma went ahead thanks to fit-again Luca Toni showing great strength and hooking in from the edge of the area on 16 minutes before strike partner Vucinic coolly doubled the lead.
Serie A top scorer Antonio Di Natale pulled one back for struggling Udinese with a debatable penalty on 38 minutes and then equalised in the second period before a Vucinic spot-kick and his third goal restored Roma's advantage.
Eighth-placed Fiorentina earlier boosted their hopes of a Europa League berth with a 3-0 home win over Genoa, who are seventh.
Argentine forward Mario Santana scored with an audacious backheel on five minutes and Alberto Gilardino netted a second-half penalty after rowing with team mate Stevan Jovetic over who would take the kick following a foul on the Montenegrin.
Substitute Khouma Babacar, 17, then slotted his first Serie A goal as Fiorentina moved within three points of sixth-placed Sampdoria, who entertained Juventus on Sunday.
