The much hyped Argentinean duo of Carlos Tevez and Javier Mascherano started the match for the Hammers, but even their influence could not get the Londoners over the line against a well organised Palermo side.
After seeing off close chances from West Ham midfielder Lee Bowyer and Tevez, Palermo took their best chance of the match on the stroke of halftime when Aimo Diana delivered a pin-point cross into the box to find Andrea Caracciolo who guided the ball past keeper Roy Carroll.
West Ham found it difficult to get any free flowing play going as the Italian side worked well to control the midfield and stay solid in defence enabling them to hold on to the away goal advantage for the return leg in Sicily in a fortnight.
In Prague, Tottenham Hotspur took an away goal advantage of their own when they defeated Slavia Prague 1-0 in their first leg match with midfielder Jermaine Jenas latching on to a Didier Zokora pass in the 37th minute.
In the second half, the Czech team had two good chances through striker Tomas Hrdlicka but England goal keeper Paul Robinson was good enough to keep a clean sheet for Spurs.
Karel Jarolim, Slavia manager admitted he is now hoping for "a little miracle" in the return leg at White Hart Lane in London in two weeks.
Sibierski scores for Newcastle
Newcastle United’s European adventure began well in Estonia where they also had a 1-0 away win over local side Levadia Tallinn.
New signing Antoine Sibierski scored on debut for the Magpies when he headed home Damien Duff's free-kick in the 10th minute, but an injury to defender Titus Bramble caused manager Glenn Roeder to reshuffle his formation resulting in a lack of cohesion for the rest of the match.
$19 million Nigerian, signing Obafemi Martins wasted two good opportunities late in the match with Vladimir Voskoboinikov and Konstantin Vassiljev also going close for the home side.
Obafemi Martins (centre) splits
the Levadia Tallinn defence
The fourth English side in UEFA Cup action was Blackburn Rovers who recorded a 2-2 draw away to SV Salzburg in Austria, where goals to Rovers’ Robbie Savage and Benni McCarthy were cancelled out by home goals to Alexander Zickler and Marc Janko, the latter’s goal coming in the 90th minute.
Other UEFA Cup action
In other matches, Irish minnows Derry City held on for a 0-0 draw at home to French side Paris St Germain while Norwegians Molde also drew 0-0 to Glasgow Rangers in Norway.
There were plenty of goals in the other match in Norway, where home side Start Kristiansand lost 5-2 to Ajax Amsterdam of Holland, while in another seven goal thriller Romania’s Dinamo Bucharest outlasted Xanthi Skoda to win 4-3 away in Greece.
However, the highest scoring match of the night was in Switzerland where Basel went out to a 6-0 lead over Rabotnicki, only to see the Macedonians pull back two goals late to go down 6-2.