Antonio Nocerino fired the Rossoneri in front shortly before the interval, with Robinho and Antonio Cassano putting the result beyond doubt in the second half.
Milan came into the match with just five points from their opening five league matches, the worst start to a season by a defending champion in 21 years.
But things looked more promising against Palermo, with Zlatan Ibrahimovic and Cassano forcing saves from visiting goalkeeper Alexandros Tzorvas in the opening 20 minutes at the San Siro.
Tzorvas then needed all his agility to keep Robinho at bay after 38 minutes, parrying an initial shot straight back to the Brazilian before somehow getting down low to deflect the follow-up effort round the post.
But the deadlock was broken two minutes later. Ibrahimovic's cross to the back post was headed on by Alberto Aquilani to Nocerino, whose diving header from close range found the target.
Ibrahimovic was also the provider for Milan's second goal after 57 minutes, delivering a great ball into the area for Robinho to plant a shot beyond the reach of Tzorvas.
Sweden international Ibrahimovic could have added another five minutes later, but turned Cassano's cross narrowly over the crossbar.
But Cassano did better moments later, firing a pass from Ignazio Abate into the bottom right corner from 10 yards out.
Palermo had not had a look-in all match, and they continued to feel the pressure until the final whistle with Tzorvas sparing further blushes thanks to two great saves to keep out Aquilani and Ibrahimovic.