The Bangkok Criminal Court ruled in favour of extradition on the grounds that Palazzolo's sentence is on criminal charges, not political ones.
"I will appeal the ruling," Palazzolo, 65, told his lawyer at the hearing. The lawyer confirmed to dpa that there would an appeal before the extradition goes ahead.
Palazzolo, who claims to be a South African national and goes by the name Robert von Palace Kolbatschenko, was arrested in Bangkok on March 30, after leaving South Africa following persistent demands from Rome for his extradition.
In 2009 the Supreme Court of Cassation, Italy's highest, upheld his conviction by a Palermo court and sentenced him in absentia to nine years in jail for associating with the Sicilian mafia.
During his 2006 trial, Palermo prosecutors said Palazzolo played a key role between business and the mafia, news reports said