Townsend only joined the Magpies from Tottenham in January, arriving at St James’ Park in a £12million move.
However, the 24-year-old is already being linked with a move away from Tyneside this summer after new boss Rafa Benitez failed to prevent he club from being relegated to the Championship.
talkSPORT understands former Real Madrid boss Benitez is keen for the England international to stay with the Toon and help them make an immediate return to the Premier League
But Palace are now expected to trigger the £13m release clause in Townsend’s contract and plan to go all out to bring the former Spurs winger back to London.
Townsend scored four goals in 13 appearances for Newcastle and despite relegation was picked on Roy Hodgson’s provisional Euro 2016 squad.
If Townsend does leave, the Magpies are ready to target Bournemouth and Scotland winger Matt Richie as a possible replacement.