Raith Rovers manager Grant Murray admits his side’s hopes of promotion are hanging by a thread after this narrow defeat.
Gavin Reilly’s winner for the Doonhamers opened up an 11-point lead on their Kirkcaldy opponents.
Murray said: “It will be very difficult now to make the play-offs. Queen’s have a decent gap but we will go out and look to win every game that we can.
“We have a lot of games coming up and we will look to finish the season as high in the table as we can.
“Palmerston is a difficult venue and they are fourth in the table for a reason. It was going to take a top-notch performance from us and a below-par performance from them to get anything and unfortunately it never happened.
“We will pick ourselves up and be ready for Hearts on Tuesday.”
Raith fell behind after nine minutes when Iain Russell spun away from Christian Nade to tap home Mark Millar’s corner.
Rovers responded well, though, and Lewis Vaughan got the better of the on-loan St Johnstone shot-stopper Zander Clark on 20 minutes.
Nade won a battle for possession on the edge of the box before teeing up Vaughan who sent a fierce shot high into the net.
Queens were back in front before the break when Kevin Holt went unpunished for a high boot and Michael Paton’s deflected cross was turned home by Reilly.
Raith never got a head of steam going in the second half to put the home defence under pressure, with their best opportunity coming late on when Nade’s pass sent Ryan Conroy through but he overran the ball before he could shoot.
Murray added: “We started the game well when you consider we had two long trips up to Inverness in the past week.
“However, we switched off at a corner for the second time in five days and that caused the opening goal. We got back into the game well with a good goal from Lewis and then lost a bad second goal when the players were waiting for a free kick to be given. The second half was an uphill battle for us and as much as tried to get players forward we never got the second goal.”