Palermo hit-man Andrea Caracciolo's winner on the stroke of half-time gave his side a crucial away goal.
And that was hard luck on West Ham who, with Carlos Tevez and Javier Mascherano in their ranks, created enough late chances to head to the Stadio Renzo Barbera all square.
Following a 1-1 draw with Aston Villa four days earlier, Alan Pardew predictably gave starts to his Argentinian amigos, who came in for Hayden Mullins and Marlon Harewood.
Roared on by a sell-out crowd determined to replicate the Hammers' glorious Euro nights of days gone by, the Eastenders were soon infuriated by the Italians' heavy-handed approach and, indeed, Mattia Cassani's early yellow card for a cynical scythe on Tevez should have been followed by more cautions.
But as the men from Sicily continued to dish out the treatment, generous Swedish referee Stefan Johannesson showed remarkable leniency.
With the congested midfield resembling an Anglo-Italian battleground goal chances were few and far between in an opening half-hour that was only illuminated by the industry and innovation of the teasing Tevez.
Neither Bobby Zamora nor Lee Bowyer could apply the finishing touch to the close-range chances that came their way, while, at the other end, David Di Michele sliced across goal.
But after Nigel Reo-Coker was booked for a lunge on Francesco Parravicini on the half-hour mark, Roy Carroll found himself denying both Marco Bresciano and Di Michele, whose glancing header was diverted around his left-hand post.
On 42 minutes, Tevez looked all set to break the deadlock when he met Zamora's deep low cross with a flying side-footer, but Alberto Fontana smothered the ball at the cost of a corner.
Just as West Ham looked to be getting on top, with seconds of the first period remaining, Aimo Diana's cross into the six-yard box was bundled home by the unmarked Caracciolo to give the visitors an interval lead.
Just after the restart, the tormenting Tevez was felled by a quartet of Palermo defenders and after Marco Pisano was booked, Paul Konchesky's 20-yard sizzler flew just an inch or so past the base of Fontana's left-hand upright.
On the hour, Carroll's forceful slide-tackle denied Caracciolo a second goal and from the resulting corner, the alert Hammers keeper claimed Cristian Zaccardo's far-post header.
Anton Ferdinand then sent a header over the Palermo crossbar before Fontana bravely plucked the ball off Yossi Benayoun's boots, collapsed in pain and hurled it behind for a corner.
As the eager Hammers went to take the flag-kick they became involved in an unsightly melee with the irate Italians.
That culminated in a deserved booking for the disgusted Di Michele who took a triple swipe at the Zamora once play restarted and the Palermo forward's frustration was later compounded when he saw Konchesky nod his 25-yard free-kick off the line.
That was the cue for Pardew to refresh his attack with the introduction of Harewood and Carlton Cole for Tevez and Zamora.
And although Harewood sent Benayoun's cross thumping on to Fontana's left-hand post, that was the closest West Ham would come to wiping out the Palermo advantage.