Theo Corbeanu was a menace for the Palace defence all afternoon down the right-hand-side, with the 18-year-old opening the scoring before Owen Hesketh doubled the Wanderers' lead after 15 minutes.
The home side's early dominance was the difference on a frosty afternoon, as Wolves sit 17 points off Leeds United at the top, albeit having three games in hand.
Story of the match
On the back of their 3-1 defeat at Stoke City at the end of January, Wolves got off to the perfect start after two minutes when Corbeanu's trickery caused confusion amongst the Eagles defence before his low cross deflected past Oliver Webber.
Wolves' dominance continued in the opening stages of the game, with Corbeanu and Austin Samuels looking dangerous going forward.
The hosts' made it 2-0 after 15 minutes when Hesketh swept home a rebound after Hugo Bueno's powerful effort was not held by Webber, providing Hesketh with the chance to add to the goal he scored at Stoke a fortnight ago.
It was very nearly 3-0 and game over after 25 minutes. Luke Cundle, another player who has been involved with the first team this season, perfectly picked out Corbeanu at the back post, who headed towards the near post. The Canadian attacker was denied by the rushing Webber in between the sticks.
Corbeanu was presented with another chance on the half-hour mark when Bueno's through ball fed the attacker through on goal. With the option to pass to Samuels or Cundle, the forward opted to go alone but he dragged his effort wide.
After a disastrous opening 45 minutes, Shaun Derry's side improved slightly in the second half, with Harlem Hale their most dangerous player.
However it was Wolves who came closest to adding to the scoring through Corbeanu again. The winger, who was clearly the best player on the pitch at Kidderminster, drove into the Palace half before cutting onto his left foot and sending the ball just over the goal.
The began to follow the same flow as a basketball match towards the end of the game, with Palace desperate to rescue a point against their promotion-rivals.
But it was Wolves again who looked the most likely to scoring, with Conor Carty forcing Webber into a smart save after an electric counter-attack from the Wanderers.
Next up for Wolves is the trip to another fellow promotion rivals, Fulham, on Friday evening, a team they defeated 3-0 earlier in the season thanks to goals from Oskar Buur, Pascal Estrada and Meritan Shabani.