David McGoldrick's second-half strike sealed a vital victory for Southampton and kept their hopes of Championship survival alive.
McGoldrick found the top corner of the net with a superb strike from outside of the area to secure the points.
Palace keeper Julian Speroni had kept Southampton at bay denying Bradley Wright-Phillips on several occasions.
Late on Shefki Kuqi's last-gasp effort was blocked on the line as Southampton held on for the three points.
Southampton boss Mark Wotte:
"The boys showed 100% commitment and are fighting for their lives.
"The players do not deserve to go down and nor do the supporters.
"We are two points from safety with three games to go and we still have Nottingham Forest to play so it is in our own hands. Three wins will keep us up."
Crystal Palace boss Neil Warnock:
"We could have been playing all night and not scored. We did not have enough quality.
"The fans know how hard I work to get the points, and I think we have done really well with the squad we have.
Sam Vokes, Jody Craddock and David Jones scored in the first 19 minutes as Wolves secured an easy win to edge closer to Premier League promotion.
Struggling Southampton, needing a win to move out of the relegation places, went behind after 32 seconds when Vokes headed home Jones' corner.
Wolves extended their lead five minutes later with Craddock heading Jones' cross into the back of the net.
Jones then converted from the spot for 3-0 after David Edwards was fouled.
Vokes, Andy Keogh and substitute Marlon Harewood all went close to netting a fourth.
Wolves' victory - their first at home to Southampton since 1979 - extended their lead at the top of the Championship to five points.
Wolves manager Mick McCarthy: "It's three points. It means I can enjoy a bottle of beer tonight and watch everybody else.
"For today, for this evening, it's taken the pressure off me and my players and it's heaped it somewhere else - whoever fancies it they can have it.
"It could have been really over and done with in the first half. We broke on a number of times but we weren't really clinical."
Southampton coach Mark Wotte on his team's start: "It throws away all the preparations. We knew that Wolves would be on fire after their performance against Birmingham so we told them to be very aggressive at the beginning of the match.
"We expected Wolves like they came, but if you don't win your headers and don't attack the ball then it's already a very difficult game.
"After 20 minutes they get the penalty and it's 3-0, and it's more or less game over.
"I'm just blaming my team for not dealing with set-pieces better than they did."
Southampton moved to the St Mary's Stadium in 2001
Southampton's future is seriously under threat, according to the man appointed to run the club's owners.
Southampton's parent company was placed in administration on Thursday and chief executive Rupert Lowe has resigned.
Trading in Southampton Leisure Holding (SLH) plc's shares was suspended on Wednesday after the company admitted it needed extra money to have a future.
"The finances are interlinked therefore the future of the club is in serious jeopardy," said administrator Mark Fry.
"The holding company owns the football club. The football club is an asset."
The holding company has been put into administration with debts of £27.5m, reportedly made up of financial liabilities of £23.1m and an overdraft of £4.4m.
It is possible that putting the parent company into administration - thus wiping out a significant proportion of the club's debt - could save the club from a 10-point deduction.
Fans' reaction to financial news
The Football League has a monthly board meeting next Tuesday, and the Southampton situation will be one of the key items on the agenda.
A spokesman told BBC Sport said it would not comment until after that meeting, and he added it was not certain the club's fate would be decided once it finished.
Clubs such as Leeds and Luton, who were hit with points deductions themselves after going into administration, would be angry if Southampton avoided such a fate.
Lowe, Saints chairman Michael Wilde and director Andrew Cowen have resigned from the company with immediate effect, although a statement from SLH said the club is "unaffected by these insolvency proceedings".
The business is heavily in debt after spending more than £30m on the 32,000-seat St Mary's Stadium, which they moved to from The Dell in 2001, before being relegated from the Premier League in 2005.
The administrators will now try and find a buyer for the club although Fry, who is joint administrator, admitted that has been an-on going process for the directors.
"The directors have tried to sell or seek investment for a considerable amount of time, which they have been unsuccessful in doing," Fry said.
The controversial Lowe was chairman at the club for 10 years until his removal in 2006 but linked up with Wilde, the man who initially replaced him, to return to the boardroom last summer.
But despite introducing a number of cost-cutting measures, including loaning out big earners and closing parts of St Mary's on match days, the south-coast club remain in desperate financial trouble.
In an earlier statement Fry insisted the club "could be an extremely attractive investment for the right buyer".
He added: "We are working hard to preserve the value of the football club and produce a positive outcome for all stakeholders.
"I ask that fans continue to show their support for the team for the remainder of the season as we seek to show the best face possible to potential investors."
Last October, SLH's bank Barclays significantly reduced the company's overdraft facility.
The Saints are second from bottom of the Championship, three points adrift of safety.
And it means they are now threatened by liquidation and could drop out of the Football League, if SLH fails to attract new investment by the end of the summer.
Former Southampton chairman Leon Crouch has admitted some responsibility for the club's financial plight.
The club's holding company has entered administration and Southampton plc chairman Rupert Lowe and football club chairman Michael Wilde have resigned.
Crouch told BBC South: "I backed Michael Wilde when he came to the club.
"He gave us promises of new investment and getting rid of Rupert Lowe, but it didn't happen, and I have to take some blame because of that."
Crouch, who was the second-largest shareholder at St Mary's until he stepped down in May 2008, lost his investment when Saints' holding company - Southampton Leisure Holding - entered administration on Thursday.
He had taken over as non-executive chairman in March 2007, after Wilde stepped down from the role, and held the post for more than a year.
But Crouch hopes the move into administration will help to safeguard the future of the struggling Championship club.
"At the moment I'm right behind the administrators," he added. "I'm a passionate Saints fan, and it's a new beginning for the club."
Crouch declined to comment on whether he would consider a bid to take on the club.
Racon (left) is congratulated by fellow scorer Bailey
Financially troubled Southampton's Championship survival hopes were dealt a massive blow as they were beaten at home by bottom club Charlton.
Jonjo Shelvey ran clear to score for Charlton but David McGoldrick levelled for Saints with a low shot.
Charlton's Tresor Kandol had a penalty saved before Therry Racon's 20-yard drive did give the away side the lead.
Nicky Bailey scored a third for the visitors and a Bradley Wright-Phillips goal for Saints made it a tense finish.
Before the game, Saints' major shareholder Leon Crouch and former manager Lawrie McMenemy urged fans to continue giving their support to the crisis-hit club, whose parent company - Southampton Leisure Holdings plc - went into administration on Thursday.
Whilst the Saints should avoid a 10-point penalty from the Football League as the club themselves are not in administration, their future remains in jeopardy, with more than £30m of debt.
Southampton boss Mark Wotte:
"This is the worst result we can have against a team who are bottom of the league and in front of a big crowd.
"We got carried away and there was too much spirit and not enough football.
"We will never give up and I'm still positive we can stay up with six games to go."
Charlton manager Phil Parkinson:
"These are two great clubs who were very highly thought of a few years ago but have fallen on difficult times.
"We will not give up until it is mathematically impossible for us to avoid relegation."
David McGoldrick's superb second-half strike earned struggling Saints a draw.
Southampton might have stolen all three points when Andrew Surman's injury-time free-kick rebounded off the post.
Blackpool took a deserved first-half lead on 20 minutes when DJ Campbell scored with a penalty after he had been pushed by Jan-Paul Saeijs.
Campbell's overhead kick was well saved by Kelvin Davis but on 69 minutes McGoldrick collected a Surman cross, turned and buried home the equaliser.
Blackpool boss Tony Parkes: "We set out not to lose this game and we achieved that point. We have gone four games unbeaten but I still think we need two more wins to reach safety.
"We missed one or two chances in the first half which would have killed the game off and they came back strongly at us.
"And we got our luck at the end when they hit the post and the ball rebounded so fast their players following it in could not get at the ball."
Southampton manager Mark Wotte: "Our boys were 100% that the Blackpool penalty was very harsh - it wasn't a penalty.
"David McGoldrick's goal typified our fighting spirit. He got into the penalty area and went for it.
"We had ridden out some luck in the first half. Their striker DJ Campbell gave our centre-halves the hardest game they've had in the last two months."
Southampton remain two points from safety in the Championship after being held to a goalless draw by QPR.
The Saints almost went in front inside two minutes as Jason Euell rounded Radek Cerny, but he shot wide.
Wayne Routledge should have put Rangers in front but he headed over from three yards, while Kelvin Davis did well to block Hogan Ephraim's shot.
The home side came closest to a winner after the break when Euell played in Andrew Surman, but Cerny saved well.
Southampton coach Mark Wotte: "The good thing is that we have edged closer to those teams above us.
"But I admit we should have won one of the two home games we have had in the last few days.
"We need to take the chances when they come our way, which is what we were doing when we had a little run of victories recently against Preston, Cardiff and Ipswich."
QPR coach Paulo Sousa: "We can still make the play-offs, but it is hard when you are without six or seven of your best players.
"We have had to bring in 17-year-olds, and it is not easy to push and motivate a squad when all your best players are absent.
"The teams above us are not pulling away, so there is a chance for us to qualify for the play-offs even now."
