When Lilli was four her family moved to Berlin-Charlottenburg. She was a junior table tennis champion as a young girl. She studied drama in Berlin but her recently negotiated two-year contract with the Frankfurt Playhouse was cancelled after Hitler came to power in 1933 and the family faced grave reminders due to their Jewish heritage. Her elder sister, Irene (1911–1996), became an Actress known as Irene Prador, later Mrs Irene Tooth. The youngest sister, Hildegard Julie Peiser (later Mrs Ross; 1919–2008), did not, however, follow her sisters' career choices. Lilli and her sisters fled Berlin to Paris but their father died in 1934 (aged 57) in Berlin. Their mother, Rose, died in 1959 (aged 77) in England.
In France, she appeared in an operetta at the Moulin Rouge, and then to London, where she began her film career. While performing in cabarets, she attracted the attention of British talent scouts and was offered a contract by the Gaumont Film Company. She made her screen debut in Crime Unlimited (1935) and appeared in numerous British films for the next decade.
Palmer's first marriage was to Rex Harrison in 1943. They divorced in 1957.
Harrison and Palmer appeared together in the hit Broadway play Bell, Book and Candle in the early 1950s and later starred in the film version of The Four Poster (1952), which was based on the award-winning Broadway play of the same name, written by Jan de Hartog. She won the Volpi Cup for Best Actress in 1953 for The Four Poster.
She periodically appeared in stage plays as well as hosting her own television series in 1951.
Palmer returned to Germany in 1954 where she played roles in many films and television productions. She also continued to play both leading and supporting parts in the U.S. and abroad. In 1957, she won the Deutscher Filmpreis for Best Actress for her portrayal of Anna Anderson in The Story of Anastasia, called Is Anna Anderson Anastasia? in the UK. In 1958, she played the role of a Teacher opposite Romy Schneider in Mädchen in Uniform (Girls in Uniform), the remake of the 1931 film of the same title.
Harrison and Palmer divorced in 1956; they had one son, Carey, born in 1944.
Palmer was married to Argentine actor Carlos Thompson from 1957 until her death in Los Angeles from abdominal cancer in 1986 at the age of 71. She was survived by her husband, son, sisters, and her ex-husband.
Ms. Palmer starred with Fred Astaire and Debbie Reynolds in The Pleasure of His Company in 1961.
She starred opposite william Holden in The Counterfeit Traitor (1962), an espionage thriller based on fact, and opposite Robert Taylor in another true Second World War story, Disney's Miracle of the White Stallions (1963). On the small screen, in 1974 she starred as Manouche Roget in the six-part television drama series The Zoo Gang, about a group of former underground freedom fighters from the Second World War, with Brian Keith, Sir John Mills and Barry Morse.
Palmer published a memoir, Change Lobsters and Dance, in 1975. Reminiscences by Vivian Matalon and Noël Coward (Matalon directed Palmer in the premiere production of Coward's play Suite in Three Keys in 1966; see A Song at Twilight) suggest that Palmer was not always the patient and reasonable person she represented herself as being in this autobiography. She wrote a full-length work of fiction presented as a novel rather than a memoir, The Red Raven in 1978.
