The Briton hit the front in the final 15 minutes of the day courtesy of a run on Pirelli's supersoft tyre, posting a 1m 26.080s that left him a few tenths clear of Mercedes' reserve driver Pascal Wehrlein.
"I think we've made real progress as a team with the set-up of the car and I know I'm improving every time I get in the car," Palmer said. "We ran through a lot of different programmes and assessments and it was a great day at the office for me."
Until that point Wehrlein had followed on from where Nico Rosberg left off on day one, setting the benchmark in terms of both pace and lap count. His 1m 26.497s was still good enough for second, while his tally of 137 laps - achieved despite the German not having fully recovered from the illness that ruled him out of running on Tuesday - was unmatched.
"I still don't feel 100 percent but it's much better, so luckily I've been able to drive," Wehrlein said. "I felt comfortable from the start. The Mercedes power unit is unbelievable and the chassis too, with a very good balance. The team has clearly been working hard and developing it even further - it's definitely a step forward."
Red Bull junior Pierre Gasly came close to demoting Wehrlein with his own late run, finishing up less than two tenths of a second down the road in third. The Frenchman failed to set a time in the RB11 in the morning, despite completing 22 laps in total.
But he still fared better than Ferrari protegee Raffaele Marciello who caused an early stoppage when he crashed his Sauber at Turn 3 after just eight laps.
The Italian, who drove for Ferrari on Tuesday, missed the rest of the morning session as a result, and while he did eventually clock up a further 67 laps in the afternoon, he ended up propping up the timesheets in ninth.
Jenson Button, back in the MP4-30 for the first time since describing its handling as "pretty scary" during the Grand Prix, racked up 100 laps on what McLaren dubbed an "extremely productive" day. A 1m 26.927s effort eclipsed his best from qualifying at the Spanish track, and had kept him second until Gasly and Palmer's late improvements.
Williams' development driver Alex Lynn, fresh from GP2 success at the weekend, finished just four hundredths of a second down the road in what was his first outing for the team. "I didn’t really sleep that well last night as I was so excited about today," Lynn enthused. "We managed to get through a really important schedule and I completed a number of runs in the car. The team were happy with how we got on and with my performance, so all-in-all it has been a really positive day."
Mercedes-backed Esteban Ocon, who was only called up to the test on Tuesday, was sixth fastest for Force India, ahead of Ferrari reserve driver Esteban Gutierrez - driving the SF15-T for the first time - and Toro Rosso's Carlos Sainz.
"Our work was aimed at the upcoming races, looking at various aspects such as driveability, aerodynamics and set-up," Gutierrez explained. "It was very exciting to drive the SF15-T for the first time and I got a very good feeling from it. It was a case of understanding how to improve the car’s set-up to better suit the new solutions we ran in the last race and that’s what we did."
In addition to Marciello's off, the red flags also flew when Sainz and Gasly ground to a halt in the pit lane in separate incidents during the afternoon.
Unofficial Wednesday testing times from Barcelona
|1||Jolyon Palmer||Lotus||1m 26.080s||87|
|2||Pascal Wehrlein||Mercedes||1m 26.497s||+0.417s||137|
|3||Pierre Gasly||Red Bull||1m 26.683s||+0.603s||75|
|4||Jenson Button||McLaren||1m 26.927s||+0.847s||100|
|5||Alex Lynn||Williams||1m 26.967s||+0.887s||52|
|6||Esteban Ocon||Force India||1m 27.520s||+1.440s||94|
|7||Esteban Gutierrez||Ferrari||1m 27.930s||+1.850s||119|
|8||Carlos Sainz||Toro Rosso||1m 27.997s||+1.917s||126|
|9||Raffaele Marciello||Ferrari||1m 28.829s||+2.749s||75|