Reports suggest that the Eagles have offered the 23-year old a trial and have hopes that he may join them at Selhurst Park in South London.
Williams recently joined Sydney from the now-defunct Fury on a loan deal for the Asian Champions League but with the Townsville club no longer running, he will have to look at his future very soon.
It is believed that former Sky Blues assistant Tony Popovic, now with Palace, has put the feelers out for Williams who already has experience in Europe with Danish club Brondby where he was between 2006 and 2010 before returning to Australia.
Sydney chief Scott Barlow indicated that there was interest from Palace but made it clear he wanted to retain Williams if it was possible.
"We think David is a great young talent and we'll do everything we can to keep him," he told the Sydney Morning Herald.
"I've heard there might be interest from Crystal Palace, but since he arrived here he's settled in extremely well and we'd love him to stay.
"We're in the process of talking to him about a new contract, and we're hopeful. [Coach Vitezslav Lavicka] has made it clear he believes David can play a big role next season."