Guidolin returned to management with Palermo in January 2004, midway through the Serie B season. Playing Luca Toni as a lone striker among experienced players and those cast off from larger teams, he won the division, taking the Sicilians back to the top flight for the first time since 1973. In the subsequent Serie A campaign, he guided Palermo to a sixth-place finish, earning their first ever UEFA Cup qualification. However, he opted to leave the club at the end of the season.