كتب : Amro Hassan
Fabrizio Miccoli (50), Edison Cavani (59) and Fabio Simplicio (80) scored for Palermo, while Ronaldino scored Milan's consolation on 83rd minutes.
The visitors were granted a first half penalty after a Marco Amelia tackle on Alexandre Pato, however, Brazilian forward Ronaldinho saw his effort punched away by the Palermo keeper.
After the interval, Palermo looked revived, and Fabrizio Miccoli put them ahead finishing off an astonishing run with a powerful shot from inside the Milan area.
Nine minutes later, Edison Cavani out-jumped Paolo Maldini to head Fabio Liverani's header past Abbiati.
On 80 minutes, Simplicio put the result beyond doubt for the hosts, after he was allowed a free header by the sloppy Milan defense.
Ronaldinho gave himself a chance to make up for his missed penalty, winning his team a second spot-kick and stepping up to successfully turn the ball in on 83 minutes.
The draw leaves Milan joint third in the league with Juventus on 27 points, while Palermo climb to twelfth place on 20 points.