Born in Medellín, Colombia, Palacios attended high school at Our Savior New American in Centereach, New York, United States. As a senior, he averaged 20.2 points, 9.3 rebounds and 2.2 steals.

Palacios played college basketball for the University of Louisville from 2004 to 2008, averaging 8.9 points and 5.7 rebounds per game. He had hoped to become the first Colombian to play in the NBA, but he was not selected in the 2008 NBA Draft. In the Louisville Media Guide, he listed former Cardinal Francisco Garcia as his favorite NBA player.

He currently plays with UB La Palma on loan from CB Gran Canaria in Spain.