On May 4, 2010, Palacio moved to Spain and signed with Caja Laboral by the end of the 2009–10 season. He helped the Basque team to win the national title for the third time in the club history, beating Barcelona 3–0 in the final series. He then returned to Kavala in August 2010, signing a one-year contract. He averaged 15.7 points, 3.8 assists and 1.3 steals during the regular season, and thus led the team to the playoffs. After the team was eliminated by PAOK, Palacio again moved to Caja Laboral until the end of the 2010–11 season.