The linebacker, who was teammates with Palmer at the Cincinnati Bengals, has made seven tackles so far this season, including three against the Houston Texans last weekend.
The Arizona Cardinals quarterback told reporters: "He's playing the position he was built for. It was the same thing for Justin Smith. Justin Smith, for four or five years [with the Bengals], was playing out of position and being used improperly. Now he's thrived since he's been there. I think Dan is on the cusp of thriving.
"I'm seeing what I knew. I knew he was extremely strong, he's was a great point-of-the-attack guy, he's going to hold the edge, he's fast enough to run down things from the backside, he's athletic enough to drop into coverage."
The 49ers and the Cardinals, who are both 3-2 so for this season, meet this weekend.