With the area's abundant fuel supply and airfield, Palembang offered significant potential as a military base to both the Allies and the Japanese.

A handful of United States Far East Air Force B-17 Flying Fortress heavy bombers also operated out of Palembang briefly in January, but these were withdrawn to Java and Australia before the battle commenced.

226 (Fighter) Group RAF also arrived at Palembang in early February: two squadrons of Hawker Hurricanes transported to Sumatra by the aircraft carrier HMS Indomitable.

The Royal Netherlands East Indies Army (KNIL) South Sumatra Island Territorial Command, its command in the Palembang area, consisted of about 2,000 troops under Lieutenant Colonel L. N. W. Vogelesang: the South Sumatra Garrison Battalion and a Stadswacht/Landstorm ("home guard/reserve") infantry company in Palembang, a Stadswacht/Landstorm infantry company in Jambi (Djambi), as well as various artillery and machine gun units.

Although the Japanese paratroopers failed to capture the Pangkalan Benteng airfield, they did manage to gain possession of the entire Pladjoe oil refinery complex undamaged.

A makeshift counter-attack by Landstorm troops and anti-aircraft gunners from Praboemoelih managed to retake the complex but took heavy losses, due to Japanese soldiers entrenched in the refinery's air raid shelters.

On the morning of 14 February, a river boat commandeered by the British Royal Navy, HMS Li Wo — under Lieutenant Thomas Wilkinson — ferrying personnel and equipment between Singapore and the Dutch East Indies, ran into the Japanese fleet.

Planes from Ryujo and land-based aircraft made a series of attacks on the Allied ships, forcing them to withdraw to the south of Sumatra.