Arsenal were pegged back in a 2-2 draw against Palace at the Emirates Stadium and when Xhaka was substituted in the second half, he was met with jeers from Arsenal fans for taking time to come off the pitch.
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The midfielder then removed his shirt when storming off the pitch and appeared to swear at his own supporters, as well as waving his arms taunting fans to boo louder and cupping his ear.
Xhaka was subsequently stripped of the club captaincy and has revealed he was ready to leave the north London club following the incident.
"My bags were packed. The passports were out," he told the Players' Tribune. "I was done with Arsenal. Finished. There was a contract on the table from another club, and all I had to do was sign. I had talked with my wife, Leonita, and we had decided to leave."
The Switzerland international said that new manager Mikel Arteta persuaded him to remain at the club but Xhaka revealed he can never forget the reaction from the Arsenal supporters.
"I was shocked. I had never experienced anything like this," he added. "When I got close to the tunnel, I looked up at the fans sitting there -- and this is the part that I will always remember.
"When I close my eyes now, I can still see their faces. I can see their anger. It's not that they don't like me. No, it's different. This is hate. Pure hate. I am really not exaggerating this.That day, I felt very disrespected. The comments were over the line. It felt personal."
He added: "I'm an emotional guy. To feel that level of hatred and disrespect, I wouldn't want it for my worst enemy. Still to this day, if we have lost, I hate walking those last metres to the tunnel, because I still recognise the faces. The same people are sitting there.
"Today I know I made the right decision, absolutely, because I'm still here. But I can't pretend that my relationship with the fans will ever be the same, because that moment will always be in my heart.
"It's like broken glass, you know? You can piece it together, but the cracks will always be there."