The Philippines reclaimed their advantage from the penalty spot just four minutes later as Younghusband scored his sixth of the campaign before Angel Guirado, returning after missing the semi-final through suspension, made it 3-1 just before the break.
Abuhabib closed the gap with his second of the match in the 67th minute only for Juan Guirado to restore the Philippines' two-goal cushion two minutes later.
Fahed Attal scored Palestine's third and although the West Asians pushed hard for the leveller the Philippines held out for the 4-3 win.
The Philippines got off to a blistering start when an intelligent ball from skipper Emelio Calgdong released Younghusband down the left flank and the 24-year-old cut inside towards goal and skilfully escaped the attention of two defenders before firing low past Palestine captain Ramzi Saleh for his first of the match.
Palestine should have drawn level three minutes later when Husam Abusalah sprung the Philippines offside trap to release Fahed Attal but he missed the chance to extend his record as he mishit his shot with only keeper Eduardo Sacapano, who was coming in for the suspended Neil Etheridge, to beat.
A lapse in concentration at the back from Khaled Mahdi, one of just four players in the Palestine squad that featured in the goalless draw with the Philippines in the qualifiers, gave Paul Mulders a golden opportunity to double the Azkals' advantage but Saleh did well to block the ADO Den Haag winger's shot with his leg.
A period of Palestine pressure followed, with Khader Abuhammad off-target from the same area as Attal's earlier miss before Mohammed Mohammed showed some deft skills to fashion a shooting opportunity only to see his 19th minute effort cannon off the crossbar.
The deserved equaliser did come a minute later with Abdulhamid Abuhabib curling the ball superbly into the top corner only for all their good work to be undone in the 24th minute, when Caligdong was tripped in the box allowing Younghusband to confidently slam home his sixth of the tournament from the penalty spot.
With four minutes of the half remaining Angel Guirado got in behind the Palestine defence and easily slipped the ball past the advancing Saleh for the Azkals' third as the Philippines took a commanding lead into the interval.
Marwin Angeles replaced injured skipper Caligdong in the second half with James Younghusband, also back from suspension, taking over the captain's armband.
Neither side was able to really test their opponent's keeper in the first 20 minutes of the second period but when there was finally a shot on target it was made to count with Palestine drawing level in the 67th minute.
The ball was worked across the face of the Philippines' penalty area, finding its way to the unmarked Abuhabib, who lashed home his second of the match.
But again, the Philippines hit back almost immediately, when good build-up play from James Younghusband and Angel Guirado sent Angel's brother Juan through on goal and the 32-year-old coolly slotted the ball past Saleh to make it 4-2 in the 69th minute.
Palestine reduced the deficit less than ten minutes later when Attal scored his ninth AFC Challenge Cup goal after the Philippines failed to clear the ball before Abuhabib was denied his hat-trick and the equaliser in the 81st minute thanks to a fine reflex save from Sacapano.
Palestine pushed hard to get back on level terms but the Philippines were not be denied the win in an epic conclusion to their 2012 AFC Challenge Cup campaign.