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Palmer was born and raised in Adelaide, South Australia.
She is the only child of Kevin Palmer, an investor, and Paula Sanders, a former nurse and missionary. The director had seen her head shot on the acting agency's website and wanted her to be in the movie.
In 2009, Palmer formed the film production company Avakea Productions, with Australian actresses Tahyna Tozzi and Nathalie Kelley.
In 2013, she played the leading role in the zombie romantic comedy Warm Bodies; later on, Palmer portrayed the fictional character of Rebecca in the 2016 supernatural horror film Lights Out.
She has also appeared in films such as December Boys, The Sorcerer's Apprentice, I Am Number Four, Take Me Home Tonight, Love and Honor, and The Ever After (which she co-wrote and co-produced with her husband, Mark Webber).
Palmer was cast to star with Tom Sturridge in her first American feature, Jumper, a science fiction film directed by Doug Liman.
Her part was later recast when the lead characters were rewritten for older actors; her role went to Rachel Bilson.