The paint blistering on your wall indicates that you have a moisture problem in that room. I would try to define this issue first.

The paint will never sand down flush, there will always be a little lip which will look like a crater once painted, especially with a smooth ceiling and textured walls.

I wont see your ceiling cracking from my house, but I would cut it back at the edges of the crack, and use drywall mud or those little tubes of spackle and a putty knife to properly apply a patch. It's just paint cracking so you won't need much of it at all, just enough to create a smooth finish once sanded so go past the edges of the crack about 3 or 4 inches with the drywall mud.

Let it dry, sand it flat, do another coat if this is your first time because you'll make mistakes, let it dry, sand flat and paint.

Is this on exterior wall or remotely under a bathroom/kitchen in the house.? Does it leak when it rains or when somebody flushes a toilet? Runs dishwasher? Showers?

Delaminating paint/plaster/sheetrock is a sign that significant moisture is absorbed into its composition. And continually being exposed to it a steady pace. It’s may not be enough to precipitate out to significantly form a wet spot or puddle. Much like a leaking washer on a shower cartridge, a shifted tub shoe or an old copper/CI drain connection that has a slow leak on certain occasions. Either way, the only way to fix this issue is address the source of the leak first. Cut out a square in the ceiling twice the size of the damage. Leave it open to dry, and Liberally spray either dilute benzyl alcohol/water or dilute bleach/water. That will disinfect and aid in the evaporation of water. Replace with appropriate thickness sheet rock

Do you have ice dams?

The paint is peeling either because it wasn’t applied right (no primer) or there’s a leak. Make sure the leak is fixed before you even put any paint or drywall mud down. Once you figure that out , scrape the paint off add some drywall mud (a couple coats) sand it down should be good.

I'd say you definitely have a leak. I say that based on what the ceiling hole looks like as well as the ripple effect on the wall. Like other commenters have started check your plumbing and if you have an air conditioner check drain lines/ drain pan.

• fix humidity problem
• remove loose paint
• spackle the paintless area
• sand it all flush
• prime
• paint

Everybody saying leak but I'm guessing the problem is that there was 2 layers of incompatible paint that are causing that blistering, or painted when too humid. Happens in my area during summer when people don't use AC in their home

Moisture problem...if you don't fix the cause of the problem it's gonna get worse and you'll get more cracks.

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Is the original ceiling old chalk-based paint? If so, you need special paint to go over that.

Glue, just glue it back up