Palmer has scored six goals in nine games for the Blues and was named as England’s Player of the Year for the 2023/24 season.
Merson has spoken about the tough choice Three Lions interim boss Lee Carsley has in midfield but says Palmer must start due to his fantastic form.
“If Palmer plays, what about Bellingham? If Bellingham plays, what about Palmer? How you get these players in the team, I do not know. It's a hard one, it's a hard one.
“He's (Palmer) got to be in the team though. He's got to be, he's bang in form. I'm a great believer in playing people who are in form; not all the time, or you don't get a team. International football's different, but he's bang in form, on top of his game, and for me he's got to play.
“Playing at No 10's going to be hard, international football's a lot different. When you start playing against the big boys, the international big boys, people look out for you.”
According to Merson the 22-year-old is not on the same level as Jude Bellingham which makes him even more important for the England side as rival teams will not target him as much.
“The one thing that you get in the Premier League now is no one ever goes man-to-man with anyone, really. No one ever goes: 'Stop Palmer playing. Stop Palmer, we'll stop Chelsea.'
“On the international side, he'll be alright at the moment. Bellingham's got the reputation, not Palmer. He catches international teams cold, not so much Ireland but other teams won't have played against him to know what he's like.
“Bellingham goes across to Spain and scores 17 in 20 games. Then in the second half of the season, clubs wise up to it that he's going to make late runs into the box. They've nipped that in the bud now, he doesn't score a goal - now he's got to think of something else.
“The same thing will happen to Palmer, but while he's hot you play these players. You have to. If you can't find a space for him now, I don't see him playing for England. He can't get any more consistent.”