The Eagles won 2-0 at the John Smith's Stadium to move out of the relegation zone and to within a point of Huddersfield, who now sit precariously just three points above the bottom three.
"I think it was a deserved result," Wagner told Sky Sports. "Credit to Crystal Palace, they deserved this win and we were below par today, especially with the ball.
"We were never able to recirculate the ball, to dominate possession and if, like we did today, you lose possession too quickly and too easily, the distances are too big to close the gaps and to go into the challenges and the battles like we wanted to do.
"This is the easy explanation of why we were not able to perform on the level which we are usually able to do."
James Tomkins put Palace ahead in the first half after Huddersfield had failed to deal with Luka Milivojevic's corner, before Milivojevic converted a penalty after the interval to wrap up a crucial three points for Roy Hodgson's team.
The defeat means that Huddersfield have taken only one point from two consecutive home matches against relegation rivals, having drawn 0-0 against Swansea last week. But Wagner remained upbeat nonetheless.
"Nobody is happy after these two home games to only have one point, but this is part of the game," said the German.
"It's important how you manage defeats and disappointments. Today it was a disappointment for sure, but this is what we have to accept and it is something we have to work with."
Huddersfield travel to Newcastle after the international break as their quest for survival continues.