The secret of good pálinka lies in the quality of the fruit. Traditionally, pálinka was often a way of making use of spoiled fruit that unsuitable for making jam - another long-standing Hungarian tradition. Today, carefully selecting the right fruit is crucial to making the best pálinkas. Experts say this simply requires a keen sense of smell and taste - as well as years of experience.

The fruit must first be cleaned with the stones removed if necessary to ensure traces of cyanide are absent from the finished product. They are then mashed to create a jam-like base, known as "cefre", which is fermented at low temperature for 10 to 15 days. No sugar may be added to this mash, but yeast and lemon juice are permitted to facilitate fermentation. In the case of fruits containing small quantities of sugar, such as quince, these additives are essential.

The quality of the fermented mash determines the flavour and aroma of the finished pálinka to a large extent. The absence of oxygen is the secret of successful fermentation, while the various gases produced during fermentation must be allowed to escape through a valve to prevent pressure build up. Any contact with oxygen or daylight, even during brief mixing of the mash, can ruin the pálinka. It is also important to maintain a constant temperature of 16-18 ºC.

The mix of fruit and alcohol produced from the "cefre" is then distilled. Pálinka must be absolutely pure and clear, so distillation is a carefully controlled process. The pure alcohol must be separated from the "head" and "tail" fractions comprising toxic forms of alcohol, without sacrificing the characteristic flavour of the fruit. The cefre is poured into a still and heated to 78 °C, the boiling point of ethanol, ensuring the absolute purity of the alcohol.

The alcohol content of the first drops can exceed 90 per cent by volume. As the mash heats up, the amount of water released grows. Traditionally, the still was heated until the distillate was diluted to around 50 per cent alcohol by volume. However, this allowed unwelcome, bitter flavours to find their way into the pálinka. As the majority of the aromas and flavours are contained in the alcohol distilled near the beginning of the process (the head), distillation is usually halted while the alcohol content is still high.

There are two types of still, the traditional kisüsti (a pot still usually made from copper) and the column still. Aside from a maximum permitted capacity of 1,000 litres, the kisüsti differs from a column still in that it requires the pálinka to be distilled twice. Modern column stills are able to effectively separate the fractions of the pálinka using a single distillation, with several levels of plates creating a larger surface area. Whichever technique is used - and there is some debate about  which is best - the master distiller must distinguish between the head, tail and centre run to obtain pure drinking alcohol (ethanol) while capturing the fruit flavours strongest in the head fraction.

Once distilled, the pálinka is aged, usually in metal casks, to allow the flavours to blend. Like whiskies, wines or brandies, some pálinkas are stored in wooden casks to add flavour and soften the alcohol by allowing it to breathe. However, this technique is often shunned as the wood can overpower the delicate fruit aromas. In some cases, fruit is added to the cask or bottle, increasing the fruitiness and adding sweetness to the pálinka.

After distillation and aging, the pálinka is diluted to between 37.5 per cent and around 60 per cent with distilled or spring water.